Please explain this statement. There should be little or no change in the realistic accounts (e.g. market consistent EV), except perhaps a change in the residual risk in the business. Why wouldn't EV change?
you'd expect the PV of future payments to roughly equal the loan, so no change in profits. Though you might expect it to go down as reinsurer will want a profit??
With realistic accounts, the value of future profits appears in the balance sheet already (without having to do financial reinsurance). If you the do financial reinsurance, you receive a loan from the reinsurer (an asset) and would need to show the repayments of the loan as a liability in your realistic accounts. Loan and PV of repayments are roughtly the same, so not much change in the net position. Hope this helps Lynn
