Category: R

A trade between two parties of a fixed interest rate with a floating interest rate where there is an increase in the notional principal as the result of an increase in the

A firms ability to identify their financial resources, expertise, and operating mandate to determine how much risk they are able to take.

The basic concept of the payment of a premium by someone who is unable to withstand a loss to a firm who agrees according to the terms of the policy to cover

This guarantees a borrower an interest rate on a loan for 30 to 90 days. This makes all financing costs known for the period of time. AKA lockin provision. Refer to drop

Discounting an instrument a second time. Each time a discount is given the credit risk goes up.

The first party involved in the contractual transfer of responsibility to another party.

When an inthemoney option is created out of a latent option by pushing the barrier above the strike price. AKA kickin option. Refer to reverse knockout option.

Economic capital set aside to cover risk related exposure and losses. It can be handled internally or with regulations. Refer to regulatory capital and risk adjusted return on capital.

The calibration of a firms financial andor operating risk and its economic capital to determine its ability to withstand unexpected losses. Refer to regulator capital and risk adjusted return on capital.

The way insurance companies get their premiums. These rates are made to cover loss and still be fair. Refer to expense loading, premium loading, and pure premium.

When a bank refuses funds for an insurance company due to previous losses. It is illegal in many jurisdictions.

Using a retrocession contract to defer responsibility from the retrocedant to a retrocessionaire. Refer to cede, recessionaire, and retrocedant.

When an inthemoney option is turned into a latent option because the barrier is below the strike price. AKA kickout option. Refer to reverse knockin option.

A delay in the funding of losses until they are more affordable instead of transferring them to a third party. Refer to finite insurance contract and finite reinsurance.

A calculation where expected losses and expenses are subtracted from revenue, income from capital is added, and this amount is divided by capital to determine risks on projects being considered for investment.

An insurers gross profitability. The higher the rate on a line the more gross profit.

Resources used to absorb risk in order to keep in the national regulatory requirements. Refer to economic capital, riskadjusted capital, tier 1 2 and 3 capital.

An attempt by a reinsurer who accepts the transfer of risks to expand their reinsurance portfolio. Refer to retrocedant and retrocession.

Stocks that are offered for purchase by the public by companies that have been privately purchased in an effort to reduce their debt.

Detecting actual, perceived, or anticipated financial and operating risks. Refer to risk management, risk quantification, and risk monitoring.