Question

What is the purpose of contingent capital in risk management?

a.

To transfer risk before the occurrence of a loss event

b.

To finance a loss after the occurrence of a major loss event

c.

To provide liquidity in times of crisis

d.

To comply with solvency margins for direct insurers

Posted under IC85 Reinsurance Management

Answer: (b).To finance a loss after the occurrence of a major loss event Explanation:Contingent capital is a way to finance a loss after the event has occurred, particularly in cases where a major loss causes a crisis of liquidity and raising fresh capital becomes expensive or impossible.

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