4 principles for assessing risk transfer vs. risk transfer test (from Freihaut)

sdeibertsdeibert
in CIA.Reins

In the CIA Reinsurance paper (page 11) is lists the key principles that provide a framework for risk transfer and risk transfer assessment (several approaches, professional judgement, consider entire agreement, assess at inception and when future cash flows change).

In the Freihaut Risk Transfer paper (starts on page 4) it lists basic tests (qualitative and quantitative) that can be done to see if risk transfer exists (reasonably self-evident, substantially all risk, ERD > 1%, and 10/10 rule).

I am having trouble differentiating the two based on how a question is worded, do you have any tips?

Comments

  • Staff_J1Staff_J1

    Some things I can think of are...

    • If it is a quantitive ask, refer to Freihaut
    • If mentions anything for self-evident, I personally refer to the CIA paper first
    • Try to pick up on hints (does it mention/ask for the principles, etc)

    Overall though, when in doubt, as you answer a question, state your assumption. Something like this...
    "Based on the XYZ paper, the risk transfer would be ABC". If in doubt of the question and it's exact ask, state the assumption of what you are assuming from the question and which source you are referring to!

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