• We are pleased to announce that the winner of our Feedback Prize Draw for the Winter 2024-25 session and winning £150 of gift vouchers is Zhao Liang Tay. Congratulations to Zhao Liang. If you fancy winning £150 worth of gift vouchers (from a major UK store) for the Summer 2025 exam sitting for just a few minutes of your time throughout the session, please see our website at https://www.acted.co.uk/further-info.html?pat=feedback#feedback-prize for more information on how you can make sure your name is included in the draw at the end of the session.
  • Please be advised that the SP1, SP5 and SP7 X1 deadline is the 14th July and not the 17th June as first stated. Please accept out apologies for any confusion caused.

Why does the risk margin increase with increased reinsurer default risk?

C

curiousactuary

Member
Why does the risk margin increase with increased reinsurer default risk. I understand the SCR will increase if the capital requirements from the default risk module increase. Is the reason why the risk margin increases is because reinsurer default risk is classed as a non-hedgeable risk?
 
Why does the risk margin increase with increased reinsurer default risk. I understand the SCR will increase if the capital requirements from the default risk module increase. Is the reason why the risk margin increases is because reinsurer default risk is classed as a non-hedgeable risk?
yes
 
Yes, counterparty default risks are classified as non-hedgeable, along with residual market risks, underwriting risks and operational risks, as there is not deemed to be a sufficient deep and liquid market to hedge them.
 
Back
Top