What Is a Bordereau?
A bordereau is a report prepared by an insurance company for a reinsurance company detailing either the assets that are covered in part by the reinsurance firm or the actual claims that have been made for damage to property protected by a contract between the two companies.
In the language of the insurance industry, the bordereau is prepared by the cedant, the company that has contractually ceded a portion of its business responsibilities to another party, the reinsurer.
- A bordereau is a report from an insurance company to its reinsurer listing either the assets covered or the actual claims paid.
- The report is compiled and sent periodically to keep the reinsurer informed about its potential liabilities or its expected premiums.
- The bordereau is a detailed document that is often replaced with a summary.
The contents of the bordereau report depend on whether it is outlining actual losses or premiums to be paid. A bordereau report is periodically provided by the reinsured party but is less commonly provided than a summary report.
Understanding the Bordereau
An insurance company will use a bordereau to provide detailed information on the different risks that a reinsurer has accepted.
The purpose of reinsurance is to alleviate some of the risks associated with insuring assets of very high value.
An insurance company uses reinsurers to reduce its risk exposure in exchange for a portion of the premiums it charges. The bordereau is needed because the insurer is still the party that is best situated to know the details of the individual insurance contracts involved and their associated risks.
Providing this documentation is often a requirement laid out in the reinsurance treaty. The bordereau comes in two varieties:
- A premium bordereau lists all of the items that are protected under the reinsurance contract, including the contact information of the insured, the amount of the risk, the time period of reinsurance coverage, and the critical dates associated with the primary insurance.
- A loss bordereau provides details on any losses and claims that have been made, and what amount the reinsurer has paid out during this time period.
The format of the report varies depending on the needs of the reinsurer and of the reinsured. The report has traditionally been provided on paper but is now more often sent in electronic form.
How the Bordereau Is Used
The reinsurer uses the information found in the premium bordereau to determine the amount of premiums that will be ceded, which allows it to book this revenue. The reinsurer can then audit this information to determine which types of risks are the most profitable to reinsure. If the amount of detail in the bordereau is excessive, the reinsured party also will provide a summary of the positions in an aggregate format.
Not every reinsurance contract requires premium bordereau reporting. A contractual clause may require only summary accounting information rather than the risk detail typically found in bordereau reporting.
The word bordereau comes from the middle French word bordrel and the old French word bort. Both mean border, edge, or margin.
Bordereau is one of many terms borrowed from the art world that are used in the reinsurance industry. Such terms are used in many professions to set apart insiders from others.