Description:
Margin over current estimate (MOCE)
A margin that exceeds the Current Estimate in valuation of technical provisions to cover the inherent uncertainty of those obligations. [Related definitions: Current Estimate, Technical provision.]
Market risk
The risk to an insurer's financial condition arising from movements in the level or volatility of market prices of assets, liabilities and financial instruments, whether on all investments as a whole (general market risk) or on an individual investment (specific market risk).
Market-consistent valuation
An economic valuation of an insurer's assets and liabilities that is consistent with either the assessment of their risk and value by market participants ("mark-to-market" valuation) or, in the absence of a direct market evaluation, the valuation principles, methodologies and risk parameters that market participants would expect to be used ("mark-to-model" valuation).
Memorandum of understanding
A formal agreement between supervisory authorities which includes compliance with a strict confidentiality regime. In such agreements, the parties acknowledge that each may only provide information under the agreement to the extent permitted or not otherwise prevented under their respective jurisdictional laws, regulations and requirements.
Minimum Capital Requirement (MCR)
In the context of a legal entity's capital adequacy assessment, the level of solvency at which, if breached, the supervisor would invoke its strongest actions, in the absence of appropriate corrective action by the insurer.
Mismatching risk
The risk emerging when the future cash flows generated by assets do not coincide with (or do not cover) the cash flow demands of the corresponding liabilities in a suitable manner. (This would include Currency Risk).
Modified coinsurance basisModified coinsurance, or "modco", differs from coinsurance and coinsurance with funds withheld agreements, in that the portion of policy assets and reserves normally entitled to the reinsurer are actually retained by the ceding company. In addition to the transactions required in a coinsurance arrangement, a "reserve adjustment" must be calculated. For each accounting period, the change in reserves is first determined. If these have increased, the amount of the increase, less interest on the reserve for the period, if positive, will be payable to the ceding company. If negative, the amount of the decrease, plus interest on the reserve, will be payable by the cedant to the reinsurer. The rationale for this procedure is that the ceding company holds the policy reserves and the corresponding assets on the reinsured business and, therefore, is responsible for the portion of the reserve increase derived from interest on the policy assets. Any other fluctuations in the reserve would be the responsibility of the reinsurer. Establishing the reserve adjustment interest rate is a complex part of the treaty negotiations. The formula for calculating the interest rate is typically set forth in the reinsurance agreement.
Money laundering
The processing of the proceeds of crime to disguise their illegal origin.
Multiple gearing
Arises where the same capital is used simultaneously as a buffer against risk in two or more regulated entities.
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