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Insurance

What is Risk Adjustment?

Risk Adjustment A quantitative allowance in insurance accounting and actuarial reserving that reflects the uncertainty in the amount and timing of insurance cash flows, ensuring that liabilities are valued prudently.

Source: CFA Institute, IFRS Foundation, FASB (GAAP), Basel III Framework

How is “Risk Adjustment” Used in Practice?

IFRS 17 requires a separate risk adjustment to be reported, representing the compensation for uncertainty in non-financial risk.

Certification Exam Relevance

CFAACCAFRM

Who Needs to Know This Term?

  • Financial Analysts
  • Bankers
  • Traders

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Frequently Asked Questions

What is Risk Adjustment?

A quantitative allowance in insurance accounting and actuarial reserving that reflects the uncertainty in the amount and timing of insurance cash flows, ensuring that liabilities are valued prudently.

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