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Reinsurance helps insurers manage volatility, protect capital and increase underwriting capacity, but realizing those benefits depends in part on collecting amounts owed by reinsurers. Overdue recoverables can create a cash flow problem and, when applicable, a statutory provision for reinsurance, commonly called a Schedule F penalty, that reduces statutory surplus.
Key Takeaways
- Schedule F penalties are not limited to financially distressed reinsurers; past due balances and collateral shortfalls can also trigger them.
- U.S. P&C policy payables due from reinsurers reached $418 billion in 2025, up from approximately $322 billion in 2020, an increase of 30% in five years. Although not a measure of Schedule F penalties, the figure shows the expanding volume of reinsurance balances requiring oversight.
- Overdue recoverables can result from billing, documentation or follow up problems.
- Early identification can reduce avoidable exposure. Alan Gray has a proven track record of helping clients resolve data issues and strengthen reinsurance oversight.
When Recoverables Become a Surplus Problem
Schedule F reports assumed and ceded reinsurance, including the aging and collateralization of recoverables. Penalties can arise from past due recoverables, including balances involving authorized reinsurers, or from collateral shortfalls, reducing statutory surplus. 1
The Growing Scale of Reinsurance Obligations
The Federal Reserve's annual level series reports approximately $418 billion in U.S. P&C policy payables due from reinsurers in 2025, up from approximately $322 billion in 2020, an increase of 30%. 2
U.S. P&C Policy Payables Due From Reinsurers
The Federal Reserve constructs its insurance sector estimates primarily from regulatory filings compiled by the NAIC and uses Schedule F data to identify P&C reinsurance relationships.3 It reports policy payables due from reinsurers, not overdue recoverables or Schedule F penalties, and therefore cannot show whether penalties have increased. However, even if only a small share of the $418 billion is subject to Schedule F penalties, the underlying collection issues could materially affect cash flow, while the penalties reduce statutory surplus.
Why Recoverables Become Overdue
- Late or incomplete billings that lack supporting documentation.
- Disputes over contract terms or calculations.
- Data errors that cause incorrect billings or unapplied payments.
- Unclear ownership that delays follow up on aging balances.
- Reinsurer status (for example, runoff or liquidation) and differences in regulatory requirements across jurisdictions (for example foreign reinsurers) can complicate collection and delay payment.
- Inadequate staffing that delays billing or collection efforts.
Early identification, clear ownership and consistent timely follow-up can prevent these issues from becoming Schedule F penalties.
How Alan Gray Can Help
Alan Gray provides resources to help insurers address aging, disputed and legacy recoverables, resolve billing and data issues, reconstruct records, support Schedule F preparation and strengthen collection workflows. Examples of Alan Gray's work include:
- Recovering unbilled balances: Alan Gray reconstructed five years of transactions that had never been billed and prepared account statements totaling $20 million due from quota-share reinsurers.
- Identifying data and transaction issues: After sampling less than 20% of a global reinsurance portfolio, Alan Gray identified more than $15 million in payments made outside the applicable transaction period. 4
These amounts represent transactions identified through Alan Gray's work rather than reported savings or confirmed collections. They nevertheless demonstrate how billing, accounting and data deficiencies can create material financial exposure.
Citations
- National Association of Insurance Commissioners. 2025 Property/Casualty Annual Statement Instructions. June 2025. Accessed 18 Sept. 2026; National Association of Insurance Commissioners. 2025 Annual Statement Blank: Property/Casualty. Schedule F, Part 3, cols. 73 and 74. Accessed 18 Sept. 2026; Lehman, Caroline, and Lauren Darr. "A Closer Look at Schedule F: Implications for P&C Insurers." Johnson Lambert, 19 Nov. 2024. Accessed 18 Sept. 2026.
- Board of Governors of the Federal Reserve System. "Property-Casualty Insurance Companies; Policy Payables Due from Reinsurers; Asset, Level [BOGZ1FL513076005A]." FRED, Federal Reserve Bank of St. Louis. Accessed 18 Sept. 2026.
- Batty, Michael. "Accounting for Reinsurance Transactions in the Financial Accounts of the United States." FEDS Notes, Board of Governors of the Federal Reserve System, 12 Oct. 2018. Accessed 18 Sept. 2026.
- Alan Gray LLC. "Reinsurance Audit Services and Professional Auditors." Alan Gray. Accessed 18 Sept. 2026.
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