Reinsurance textbooks

[Lenin]

Again, thanks for all your replies.
For the sake of documentation, Carter on Reinsurance does not help much either.
I am not implying that the uniqueness of the RI treaties is meant for dishonest purposes.

[DiscreteAndDiscreet]

There is a book called Accounting Standards: True or False where the author develops the idea that the primary function of accounting is attesting that funds assigned to the custody of an organization have been properly handled and that coupling the measurement of economic value to accounting can't be handled in a uniform manner. His argument is that accounting standards, whether you use historical cost or fair value, implicitly assume that you are measuring an ergodic process where a snapshot of any one period gives you a picture of things that could happen in any other period. His suggested solution is to separate custodial accounting from performance measurement and require companies to disclose their business plans and their methodology for measuring performance relative to those plans.

You might say that finite risk contracts can be viewed as an attempt to implement that framework with a reinsurer underwriting (in the securities market sense) the business plan and performance measurement. A finite risk contract might implement a very sensible framework for evaluating performance, but the risk transfer rules limit the ability to recognize accruals under that framework if it's too dissimilar from the mandated framework. Most study materials are going to be about the mandated framework, although I guess ORSA might be an effective venue for incorporating evidence of solvency that is not allowed to be recognized in the mandated framework. Maybe you should poke around ORSA and ERM materials for discussions of information that can be reflected in those models that is disallowed in financial statements.

I don't work in insurance, I've just been studying some of this material for the sake of broadening my horizons.

[JMO]

Originally Posted by DiscreteAndDiscreet

There is a book called Accounting Standards: True or False where the author develops the idea that the primary function of accounting is attesting that funds assigned to the custody of an organization have been properly handled and that coupling the measurement of economic value to accounting can't be handled in a uniform manner. His argument is that accounting standards, whether you use historical cost or fair value, implicitly assume that you are measuring an ergodic process where a snapshot of any one period gives you a picture of things that could happen in any other period. His suggested solution is to separate custodial accounting from performance measurement and require companies to disclose their business plans and their methodology for measuring performance relative to those plans.

You might say that finite risk contracts can be viewed as an attempt to implement that framework with a reinsurer underwriting (in the securities market sense) the business plan and performance measurement. A finite risk contract might implement a very sensible framework for evaluating performance, but the risk transfer rules limit the ability to recognize accruals under that framework if it's too dissimilar from the mandated framework. Most study materials are going to be about the mandated framework, although I guess ORSA might be an effective venue for incorporating evidence of solvency that is not allowed to be recognized in the mandated framework. Maybe you should poke around ORSA and ERM materials for discussions of information that can be reflected in those models that is disallowed in financial statements.

I don't work in insurance, I've just been studying some of this material for the sake of broadening my horizons.

Interesting perspective. Thanks for posting.

ETA
Not the same argument, but a parallel one is that statutory accounting is incompatible with the economic facts of the business. When the discrepancy is too large (on the life insurance side, so-called Triple-X reserves are a glaring example), reinsurance is structured for the purpose of presenting result more consistent with economic truth.