Question

How can the exposure to counterparty risk be mitigated?

a.

By increasing exposure to the reinsurer

b.

By reducing the need for collateral

c.

By implementing defined actions based on credit ratings

d.

By avoiding reinsurance arrangements altogether

Posted under IC 92 Actuarial Aspects of Product Development

Answer: (c).By implementing defined actions based on credit ratings Explanation:Exposure to counterparty risk can be mitigated by implementing defined actions, such as reducing the amount of reinsurance ceded to any reinsurer whose credit rating falls below a specified level.

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Q. How can the exposure to counterparty risk be mitigated?
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