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𝗘𝗜𝗢𝗣𝗔 has issued new guidance on supervising 𝗺𝗮𝘀𝘀-𝗹𝗮𝗽𝘀𝗲 𝗿𝗲𝗶𝗻𝘀𝘂𝗿𝗮𝗻𝗰𝗲 and 𝗿𝗲𝗶𝗻𝘀𝘂𝗿𝗮𝗻𝗰𝗲 𝘁𝗲𝗿𝗺𝗶𝗻𝗮𝘁𝗶𝗼𝗻 clauses. This guidance, provided in two annexes to its 2021 Opinion on risk-mitigation techniques, aims to standardize supervisory approaches across Europe.
The first annex focuses on 𝗺𝗮𝘀𝘀-𝗹𝗮𝗽𝘀𝗲 𝗿𝗲𝗶𝗻𝘀𝘂𝗿𝗮𝗻𝗰𝗲, offering detailed guidance for supervisors on its prudential treatment. It emphasizes ensuring a common European approach, particularly in light of recent high lapse risks in various markets. The guidance helps supervisors evaluate how elements like the measurement period, exclusions, or termination clauses affect risk transfer effectiveness and the 𝗦𝗼𝗹𝘃𝗲𝗻𝗰𝘆 𝗖𝗮𝗽𝗶𝘁𝗮𝗹 𝗥𝗲𝗾𝘂𝗶𝗿𝗲𝗺𝗲𝗻𝘁 (𝗦𝗖𝗥). A 12-month measurement period is generally expected, aligning with the SCR time horizon.
The second annex addresses 𝘁𝗲𝗿𝗺𝗶𝗻𝗮𝘁𝗶𝗼𝗻 𝗰𝗹𝗮𝘂𝘀𝗲𝘀 𝗶𝗻 𝗿𝗲𝗶𝗻𝘀𝘂𝗿𝗮𝗻𝗰𝗲 agreements that could undermine effective risk transfer. It highlights provisions that release the reinsurer from responsibility for legitimate losses during the treaty period and scrutinizes contracts where reinsurers can unconditionally retain transferred premiums and assets upon termination while being freed from obligations. These annexes promote supervisory convergence and fair competition within the market.

While previous research has focused on #cyberrisk #riskmitigation measures, this study describes the emergence of various real-world cyber #risktransfer products in the last decade, including #warranties, #cloudcomputing partnerships, #parametricinsurance, #reinsurance, and #cyber #catbonds.

#insurance#climaterisk"This paper discusses the relationship between the financial constraints faced by infrastructure assets due to #floodrisk exposure and their ability to finance adaptation to such #risks through internal resources. #risktransfer mechanisms such as #floodinsurance were shown to be a consistent channel leading to increases in #riskreduction through adaptation. "