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Sept 2017 Paper 2 Question 4 (ii)

O

omurice

Active Member
Hi,

The answer states that 'Risks that are outside of the risk tolerance of an individual subsidiary could be reinsured within the group'.

Would like to ask what does reinsured within the group means here? Is it self-insured?
 
Hi,

As per my understanding, within the group that the insurer is, it can choose to diversify internally by insuring internally among its different subsidiaries, such that diversification benefits can be achieved by self-insuring risks. If the risk tolerance level exceeds the internal agreed group risk tolerance threshold, then it might consider to use external reinsurance.

Hope this helps.
 
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