Gurenko, Eugene N.
Insurance Risk Transfer and Categorization of Reinsurance Contracts Eugene N. Gurenko [electronic resource] / Eugene N. Gurenko - Washington, D.C., The World Bank, 2012 - 1 online resource (41 p.) - Policy research working papers. World Bank e-Library. .
Despite the existence of numerous quantitative approaches to the categorization of financial reinsurance contracts, often insurance regulators may find the practical implementation of the task to be technically challenging. This research paper develops a simple, affordable, and robust regulatory method that can help insurance regulators to categorize financial reinsurance contracts as reinsurance or financial instruments. By reviewing real examples of different categorization methods, this paper explains how the proposed method standardizes such categorization. It also summarizes the existing pertinent literature on the subject with the view to helping insurance regulators to first apply some simple indicators to flag the main issues with financial reinsurance contracts that may need further reviews. Having identified the suspicious reinsurance contracts, supervisors may consider several solutions provided by the authors and, in some cases, requiring further quantitative testing of risk transfer contracts for categorization purposes, supervisors may also consider adopting the Standardized Expected Reinsurer's Deficit approach to contract testing presented in this paper. The approach advocates the use of a simple standardized stochastic method that would allow market participants and regulators to perform robust quantitative tests quickly and at an affordable cost. Besides addressing the obvious drawbacks of the "10-10" test, the proposed alternative method allows a great reduction in the technical challenges posed to the users of the Expected Reinsurer's Deficit approach based on full stochastic models with only a minimum loss of predictive accuracy.
10.1596/1813-9450-6299
Debt Markets
Finance and Financial Sector Development
Finite Reinsurance
Hazard Risk Management
Insurance & Risk Mitigation
Insurance Law
Insurance Risks
Labor Policies
Private Sector Development
Reinsurance
Reinsurance Contracts Categorization
Risk Transfer
Insurance Risk Transfer and Categorization of Reinsurance Contracts Eugene N. Gurenko [electronic resource] / Eugene N. Gurenko - Washington, D.C., The World Bank, 2012 - 1 online resource (41 p.) - Policy research working papers. World Bank e-Library. .
Despite the existence of numerous quantitative approaches to the categorization of financial reinsurance contracts, often insurance regulators may find the practical implementation of the task to be technically challenging. This research paper develops a simple, affordable, and robust regulatory method that can help insurance regulators to categorize financial reinsurance contracts as reinsurance or financial instruments. By reviewing real examples of different categorization methods, this paper explains how the proposed method standardizes such categorization. It also summarizes the existing pertinent literature on the subject with the view to helping insurance regulators to first apply some simple indicators to flag the main issues with financial reinsurance contracts that may need further reviews. Having identified the suspicious reinsurance contracts, supervisors may consider several solutions provided by the authors and, in some cases, requiring further quantitative testing of risk transfer contracts for categorization purposes, supervisors may also consider adopting the Standardized Expected Reinsurer's Deficit approach to contract testing presented in this paper. The approach advocates the use of a simple standardized stochastic method that would allow market participants and regulators to perform robust quantitative tests quickly and at an affordable cost. Besides addressing the obvious drawbacks of the "10-10" test, the proposed alternative method allows a great reduction in the technical challenges posed to the users of the Expected Reinsurer's Deficit approach based on full stochastic models with only a minimum loss of predictive accuracy.
10.1596/1813-9450-6299
Debt Markets
Finance and Financial Sector Development
Finite Reinsurance
Hazard Risk Management
Insurance & Risk Mitigation
Insurance Law
Insurance Risks
Labor Policies
Private Sector Development
Reinsurance
Reinsurance Contracts Categorization
Risk Transfer