Financial/Financing Reinsurance

[Ralphy]

The core reading (chapter 26) gives separate definitions for Financing reinsurance and Financial reinsurance with "Financing" relating to long-term contracts and "Financial" relating to short-term contracts. However, at the bottom of page 36 (in the non core reading) that both terms are used interchangably. The ActEd solution to Q8 on the Sept 06 paper again distinguishes between the two definitions.

Is it necessary to make the distinction in the names or would it be acceptable to use either heading as long as long-term and short-term business are both appropriately covered? I keep getting mixed up between the two so it would be good if the names didn't matter, just the meanings.

 

[Steve McIntosh]

Given that the names are used interchangeably in practice, I really don’t think it matters. Certainly lots of people use the term "Financial Reinsurance" to mean what is described as "Financing R/I" in the Core Reading. The examiners wouldn't penalise someone for using one of these terms whilst they've actually described the other. So in most cases I wouldn't worry.

Having said that, if they specifically asked you to describe ONE of these types, you would need to make sure that you describe that type.

However, what’s more important that the names is that you understand the difference between the two types covered, and that you are able to describe either, or both (as appropriate), in the exam. If you’re unsure, you could always just say “Fin Re”!