Are there any tangible examples of this that you can give? I was thinking something along the lines of defaults from assets but you can buy credit default swaps and other instruments to hedge against this. Maybe the market risk around discounting a stochastic payment pattern which you can't buy an instrument to match in the market place? But how would you quantify this? Hold cash? Thanks
A risk is hedgeable if you can find an asset which behaves in the opposite way, so a gain in the asset will offset a loss on the risk. Most insurance risks will therefore be non-hedgeable, because you can never exactly match your liabilities. See Appendix A of this document: http://www.cfoforum.nl/letters/CRO-Forum_MVL_Paper.pdf
