Construction of a hedging platform
About This Project
Construction of a hedging platform for a Reinsurance Company
Project Scope:
- Build-up of the organisation, processes and quantitative risk management tools necessary to manage the risk of life reinsurance
- The hedging platform should enable the operative risk management department to fulfill the central function that structures, prices, underwrites and risk-manages life reinsurance contracts containing capital market risks
- The hedging platform manages the risk from reinsurance covering internal and external clients by
- transferring market risk as far as financial instruments are traded in deep and liquid markets (execution of large scale and highly frequent hedging)
- diversifying risk that is reliably quantifiable using actuarial techniques
- limiting risks that are neither hedgeable nor diversifiable
Project Results:
- Analysis of the capital market risks contained in the reinsurance contracts and their hedging possibilities
- Structured organisation and processes
- Development of an infrastructure, the reporting and the analysis of the capital market risks resulting from structured reinsurance contracts
Customer Value:
- Increasing transaction volumes because of reductions from time to market
- Reduction of operational risk through the outsourcing of the hedging partner, transparent limit steering, neartime P&L and industry standards
- Flexibility in mapping of new business
- Cost reduction of the reinsurance contracts because of daily P&L analysis, reduction of trading frequency