CAS Exam 9 Spring 2013, Question 23
Study guide: Exam 9
Part a (1 point)
Two techniques for setting reinsurance risk loads are the swap technique and the option technique. Describe the investment strategies that underlie each.
Part b (0.5 points)
Briefly describe the two constraints that must be satisfied in both the swap and option techniques.
Part c (0.5 points)
A reinsurer has calculated indications for allocated asset and risk load amounts for all four combinations of financial techniques and constraints. Identify the steps the reinsurer would go through to select the risk load for this treaty.
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