commutations: reasons for & against move to Odo.FinReg
The following should be part of Odo.FinReg. Can we re-label the exam questions that relate here as Odo.FinReg questions? Currently listed in BK.ReIns. Information from BK.ReIns can be used to guess what are reasonable answers, but question is directly testing Odo.FinReg.
commutations:
- reasons for & against
reinsurer from Odo.FinReg
The primary motivation for a reinsurer to commute is to bring certainty to its results; however, there are other benefits to the reinsurer associated with commutation, including capital relief and savings in claims adjusting and administrative costs.
Insurer from Odo.FinReg
From an insurer’s point of view, there can be a benefit from commutation if there is a concern in respect of the creditworthiness of the reinsurer — the receipt of cash extinguishes this risk. Insurers also will save administrative costs. Insurers, however, once they receive the cash payment will be subject to the risk of any future adverse loss experience in respect of the commuted liability and will have to hold capital for this risk.
we can technically use a small subset of Blanchard & Klann for the re-insurer
- Stabilize loss experience (already above)
- Provide surplus relief (already from above)
- Facilitate withdrawal from a market segment (new)
Comments
That makes sense. I've moved them and the changes will take effect on the next upload. That will be within about a week after the 2019.Fall exam next Tuesday Oct 29.
Thanks for pointing that out.