What is Risk Margin?
Risk Margin An additional allowance in technical provisions to reflect the uncertainty in insurance liabilities, ensuring that the value of obligations is sufficient to transfer to another insurer.
Source: CFA Institute, IFRS Foundation, FASB (GAAP), Basel III Framework
How is “Risk Margin” Used in Practice?
Solvency II requires insurance companies to hold a risk margin on their balance sheet to cover the cost of transferring insurance obligations to a third party.
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Who Needs to Know This Term?
- Financial Analysts
- Bankers
- Traders
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What is Risk Margin?
An additional allowance in technical provisions to reflect the uncertainty in insurance liabilities, ensuring that the value of obligations is sufficient to transfer to another insurer.
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