Insurance Risk Transfer and Categorization of Reinsurance Contracts

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 deve...

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Main Authors:	Gurenko, Eugene N., Itigin, Alexander, Wiechert, Renate
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2013
Subjects:	ACCOUNTING STANDARD ACCOUNTING STANDARDS ACTUARIES AMOUNT OF RISK AUDITORS BALANCE SHEET BROKERAGE BULK REINSURANCE CAPITAL MARKETS CAPITAL REQUIREMENTS CASH FLOW CASH FLOWS CASH INFLOWS CASUALTY CATASTROPHE BONDS CATASTROPHE LOSS CATASTROPHES CEDANT CEDANTS CEDING INSURER CEDING INSURERS CERTIFIED PUBLIC ACCOUNTANTS COMMISSIONS COMMODITY PRICE COVERAGE CREDIT RATING CREDITOR DEGREE OF RISK DEPOSIT DEPOSIT LIABILITY DEVELOPING COUNTRIES ECONOMIC RISK ECONOMICS EXCESS OF LOSS REINSURANCE EXCHANGE RATE FINANCIAL INSTITUTIONS FINANCIAL INSTRUMENT FINANCIAL INSTRUMENTS FINANCIAL REINSURANCE FINANCIAL REPORTING FINANCIAL RISK FINANCIAL RISKS FOREIGN EXCHANGE FRAUDULENT TRANSACTIONS INNOVATIONS INSPECTIONS INSURANCE INSURANCE COMMISSIONERS INSURANCE COMPANY INSURANCE INDUSTRY INSURANCE POLICIES INSURANCE PREMIUM INSURANCE RISK INSURANCE SUPERVISION INSURANCE SUPERVISORS INSURED EVENTS INSURERS INTEREST RATE INTEREST RATES INTERNATIONAL BANK INVESTMENT INCOME LEVEL OF RISK LIABILITY INSURANCE LIMIT OF LIABILITY LOSS RATIO LOSS STATEMENT MARKET PARTICIPANTS MARKET PLAYERS MATURE MARKETS MATURITIES MITIGATION MOTIVATION NATURAL CATASTROPHE PARTICIPATIONS PORTFOLIO PORTFOLIOS PREMIUMS PROFIT SHARING PROGRAMS PROPORTIONAL REINSURANCE QUOTA SHARE REINSURANCE RATES REGULATORY AUTHORITIES REINSURANCE REINSURANCE ACCOUNTING REINSURANCE AGREEMENT REINSURANCE COMMISSION REINSURANCE COMPANIES REINSURANCE CONTRACT REINSURANCE CONTRACTS REINSURANCE PREMIUMS REINSURANCE TREATY REINSURER REINSURERS RELIEF RETURNS RISK EXPOSURE RISK MANAGEMENT RISK TRANSFER SETTLEMENT SOLVENCY TARGET RISK TRANSACTION TREATIES TREATY REINSURANCE UNDERWRITING VALUATION
Online Access:	http://documents.worldbank.org/curated/en/2012/12/17124490/insurance-risk-transfer-categorization-reinsurance-contracts http://hdl.handle.net/10986/12205

id	okr-10986-12205
recordtype	oai_dc
spelling	okr-10986-122052021-04-23T14:03:05Z Insurance Risk Transfer and Categorization of Reinsurance Contracts Gurenko, Eugene N. Itigin, Alexander Wiechert, Renate ACCOUNTING STANDARD ACCOUNTING STANDARDS ACTUARIES AMOUNT OF RISK AUDITORS BALANCE SHEET BROKERAGE BULK REINSURANCE CAPITAL MARKETS CAPITAL REQUIREMENTS CASH FLOW CASH FLOWS CASH INFLOWS CASUALTY CATASTROPHE BONDS CATASTROPHE LOSS CATASTROPHES CEDANT CEDANTS CEDING INSURER CEDING INSURERS CERTIFIED PUBLIC ACCOUNTANTS COMMISSIONS COMMODITY PRICE COVERAGE CREDIT RATING CREDITOR DEGREE OF RISK DEPOSIT DEPOSIT LIABILITY DEVELOPING COUNTRIES ECONOMIC RISK ECONOMICS EXCESS OF LOSS REINSURANCE EXCHANGE RATE FINANCIAL INSTITUTIONS FINANCIAL INSTRUMENT FINANCIAL INSTRUMENTS FINANCIAL REINSURANCE FINANCIAL REPORTING FINANCIAL RISK FINANCIAL RISKS FOREIGN EXCHANGE FRAUDULENT TRANSACTIONS INNOVATIONS INSPECTIONS INSURANCE INSURANCE COMMISSIONERS INSURANCE COMPANY INSURANCE INDUSTRY INSURANCE POLICIES INSURANCE PREMIUM INSURANCE RISK INSURANCE SUPERVISION INSURANCE SUPERVISORS INSURED EVENTS INSURERS INTEREST RATE INTEREST RATES INTERNATIONAL BANK INVESTMENT INCOME LEVEL OF RISK LIABILITY INSURANCE LIMIT OF LIABILITY LOSS RATIO LOSS STATEMENT MARKET PARTICIPANTS MARKET PLAYERS MATURE MARKETS MATURITIES MITIGATION MOTIVATION NATURAL CATASTROPHE PARTICIPATIONS PORTFOLIO PORTFOLIOS PREMIUMS PROFIT SHARING PROGRAMS PROPORTIONAL REINSURANCE QUOTA SHARE REINSURANCE RATES REGULATORY AUTHORITIES REINSURANCE REINSURANCE ACCOUNTING REINSURANCE AGREEMENT REINSURANCE COMMISSION REINSURANCE COMPANIES REINSURANCE CONTRACT REINSURANCE CONTRACTS REINSURANCE PREMIUMS REINSURANCE TREATY REINSURER REINSURERS RELIEF RETURNS RISK EXPOSURE RISK MANAGEMENT RISK TRANSFER SETTLEMENT SOLVENCY TARGET RISK TRANSACTION TREATIES TREATY REINSURANCE UNDERWRITING VALUATION 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. 2013-01-29T18:12:34Z 2013-01-29T18:12:34Z 2012-12 http://documents.worldbank.org/curated/en/2012/12/17124490/insurance-risk-transfer-categorization-reinsurance-contracts http://hdl.handle.net/10986/12205 English en_US Policy Research Working Paper; No. 6299 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	ACCOUNTING STANDARD ACCOUNTING STANDARDS ACTUARIES AMOUNT OF RISK AUDITORS BALANCE SHEET BROKERAGE BULK REINSURANCE CAPITAL MARKETS CAPITAL REQUIREMENTS CASH FLOW CASH FLOWS CASH INFLOWS CASUALTY CATASTROPHE BONDS CATASTROPHE LOSS CATASTROPHES CEDANT CEDANTS CEDING INSURER CEDING INSURERS CERTIFIED PUBLIC ACCOUNTANTS COMMISSIONS COMMODITY PRICE COVERAGE CREDIT RATING CREDITOR DEGREE OF RISK DEPOSIT DEPOSIT LIABILITY DEVELOPING COUNTRIES ECONOMIC RISK ECONOMICS EXCESS OF LOSS REINSURANCE EXCHANGE RATE FINANCIAL INSTITUTIONS FINANCIAL INSTRUMENT FINANCIAL INSTRUMENTS FINANCIAL REINSURANCE FINANCIAL REPORTING FINANCIAL RISK FINANCIAL RISKS FOREIGN EXCHANGE FRAUDULENT TRANSACTIONS INNOVATIONS INSPECTIONS INSURANCE INSURANCE COMMISSIONERS INSURANCE COMPANY INSURANCE INDUSTRY INSURANCE POLICIES INSURANCE PREMIUM INSURANCE RISK INSURANCE SUPERVISION INSURANCE SUPERVISORS INSURED EVENTS INSURERS INTEREST RATE INTEREST RATES INTERNATIONAL BANK INVESTMENT INCOME LEVEL OF RISK LIABILITY INSURANCE LIMIT OF LIABILITY LOSS RATIO LOSS STATEMENT MARKET PARTICIPANTS MARKET PLAYERS MATURE MARKETS MATURITIES MITIGATION MOTIVATION NATURAL CATASTROPHE PARTICIPATIONS PORTFOLIO PORTFOLIOS PREMIUMS PROFIT SHARING PROGRAMS PROPORTIONAL REINSURANCE QUOTA SHARE REINSURANCE RATES REGULATORY AUTHORITIES REINSURANCE REINSURANCE ACCOUNTING REINSURANCE AGREEMENT REINSURANCE COMMISSION REINSURANCE COMPANIES REINSURANCE CONTRACT REINSURANCE CONTRACTS REINSURANCE PREMIUMS REINSURANCE TREATY REINSURER REINSURERS RELIEF RETURNS RISK EXPOSURE RISK MANAGEMENT RISK TRANSFER SETTLEMENT SOLVENCY TARGET RISK TRANSACTION TREATIES TREATY REINSURANCE UNDERWRITING VALUATION
spellingShingle	ACCOUNTING STANDARD ACCOUNTING STANDARDS ACTUARIES AMOUNT OF RISK AUDITORS BALANCE SHEET BROKERAGE BULK REINSURANCE CAPITAL MARKETS CAPITAL REQUIREMENTS CASH FLOW CASH FLOWS CASH INFLOWS CASUALTY CATASTROPHE BONDS CATASTROPHE LOSS CATASTROPHES CEDANT CEDANTS CEDING INSURER CEDING INSURERS CERTIFIED PUBLIC ACCOUNTANTS COMMISSIONS COMMODITY PRICE COVERAGE CREDIT RATING CREDITOR DEGREE OF RISK DEPOSIT DEPOSIT LIABILITY DEVELOPING COUNTRIES ECONOMIC RISK ECONOMICS EXCESS OF LOSS REINSURANCE EXCHANGE RATE FINANCIAL INSTITUTIONS FINANCIAL INSTRUMENT FINANCIAL INSTRUMENTS FINANCIAL REINSURANCE FINANCIAL REPORTING FINANCIAL RISK FINANCIAL RISKS FOREIGN EXCHANGE FRAUDULENT TRANSACTIONS INNOVATIONS INSPECTIONS INSURANCE INSURANCE COMMISSIONERS INSURANCE COMPANY INSURANCE INDUSTRY INSURANCE POLICIES INSURANCE PREMIUM INSURANCE RISK INSURANCE SUPERVISION INSURANCE SUPERVISORS INSURED EVENTS INSURERS INTEREST RATE INTEREST RATES INTERNATIONAL BANK INVESTMENT INCOME LEVEL OF RISK LIABILITY INSURANCE LIMIT OF LIABILITY LOSS RATIO LOSS STATEMENT MARKET PARTICIPANTS MARKET PLAYERS MATURE MARKETS MATURITIES MITIGATION MOTIVATION NATURAL CATASTROPHE PARTICIPATIONS PORTFOLIO PORTFOLIOS PREMIUMS PROFIT SHARING PROGRAMS PROPORTIONAL REINSURANCE QUOTA SHARE REINSURANCE RATES REGULATORY AUTHORITIES REINSURANCE REINSURANCE ACCOUNTING REINSURANCE AGREEMENT REINSURANCE COMMISSION REINSURANCE COMPANIES REINSURANCE CONTRACT REINSURANCE CONTRACTS REINSURANCE PREMIUMS REINSURANCE TREATY REINSURER REINSURERS RELIEF RETURNS RISK EXPOSURE RISK MANAGEMENT RISK TRANSFER SETTLEMENT SOLVENCY TARGET RISK TRANSACTION TREATIES TREATY REINSURANCE UNDERWRITING VALUATION Gurenko, Eugene N. Itigin, Alexander Wiechert, Renate Insurance Risk Transfer and Categorization of Reinsurance Contracts
relation	Policy Research Working Paper; No. 6299
description	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.
format	Publications & Research :: Policy Research Working Paper
author	Gurenko, Eugene N. Itigin, Alexander Wiechert, Renate
author_facet	Gurenko, Eugene N. Itigin, Alexander Wiechert, Renate
author_sort	Gurenko, Eugene N.
title	Insurance Risk Transfer and Categorization of Reinsurance Contracts
title_short	Insurance Risk Transfer and Categorization of Reinsurance Contracts
title_full	Insurance Risk Transfer and Categorization of Reinsurance Contracts
title_fullStr	Insurance Risk Transfer and Categorization of Reinsurance Contracts
title_full_unstemmed	Insurance Risk Transfer and Categorization of Reinsurance Contracts
title_sort	insurance risk transfer and categorization of reinsurance contracts
publisher	World Bank, Washington, DC
publishDate	2013
url	http://documents.worldbank.org/curated/en/2012/12/17124490/insurance-risk-transfer-categorization-reinsurance-contracts http://hdl.handle.net/10986/12205
_version_	1764422217892888576

Insurance Risk Transfer and Categorization of Reinsurance Contracts

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