Description:
Rating agency
Entity that specialises in assigning credit ratings to borrowers.
Regulatory capital
Surplus of assets over liabilities, evaluated in accordance with regulation in a particular jurisdiction.
Regulatory capital requirements
Financial requirements that are set as part of the solvency regime and relates to the determination of amounts of capital that an insurer must have in addition to its technical provisions and other liabilities.
Reinsurance
An insurance contract between one insurer or reinsurer (the reinsurer) and another insurer (the cedant) to indemnify against losses on one or more contracts issued by the cedant in exchange for a consideration (the premium).
Reinsurer
An insurer that offers protection through the sale of a reinsurance contract to a risk-transferring policyholder who is an insurer. If the risk-transferring policyholder is a (re)insurer itself, the risk-assuming insurer is called the reinsurer, and the risk transfer is known as retrocession.
Resolution
Any action by an authority, with or without private sector involvement to deal with serious problems in an insurer or insurance group that imperil the viability of the insurer or the insurance group.
Retakaful
Reinsurance undertaken in accordance with Islamic Takaful principles. [Related definition: Takaful]
Retrospective cover (or adverse loss contract)
Reinsurance contract that provides protection against an unexpected deterioration of prior year reserves than expected.
Risk appetite
The amount of risk an insurer is willing to accept in the aggregate, relative to financial capacity to assume losses, and to align with and support its strategic and financial objectives. [Related definition: Risk tolerance]
Risk concentration
An exposure with the potential to produce an accumulation of losses large enough to threaten an insurer's financial condition or ability to maintain core operations. [Related definitions: Concentration risk, Contagion].
Risk gap
A key measure of the adequacy of a captive's capital and reserves is the risk gap. This is defined as the projected total of a captive's net retained liability less year one premiums net of expenses, capital, profit and loss account balance and any other free reserves. Captive owners and managers are required to demonstrate how the captive manages the risk gap. Protection strategies may include guarantees of additional capital or premiums, LOCs, or other alternatives in a form acceptable to the supervisor.
Risk management
Risk management is the process whereby the insurer's management takes action to assess and control the impact of past and potential future events that could be detrimental to the insurer. These events can impact both the asset and liability sides of the insurer's balance sheet, and the insurer's cash flow.
Risk tolerance
The term "risk tolerance" is used to include the active retention of risk that is appropriate for an insurer in the context of its strategy, financial strength, and the nature, scale and complexity of its business and risks. Risk tolerance is typically a percentage of the absolute risk bearing capacity for an insurer. [Related definition: Risk appetite]
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