Why do we care if RT took place - Conditions

michaeletkin

Risk transfer is (PASS)ing on the risk.

Why do we care if Risk Transfer took place?

P: Pricing (reinsurer cannot price without knowing how much risk they've taken on)
A: Accounting (cedant may use reinsurance accounting treatment which is more favourable)

Conditions for contract to receive reinsurance accounting treatment (Sir Slip)

S: Significant Insurance Risk is assumed by reinsurer (SIR)
S: Significant Loss Is Possible (to the reinsurer) (SLIP)

graham

I have linked to this from the wiki. Thx!