Finite reinsurance

(1) Finite reinsurance is reinsurance under which the aggregate economic risk assumed, arising from the assumption of both a significant underwriting risk and a risk relating to the timing of settlement, exceeds the premium sum over the entire term of the insurance contract by a limited but significant amount (sufficient risk transfer), where, in doing so, at least
1. interest factors (the time value of money) are taken into account explicitly and to a significant extent, or
2. contractual provisions ensure that the economic results are balanced between the contracting parties over the entire term of the contract, in order to enable a targeted transfer of risk. The provisions of this Act that are linked to the existence of reinsurance apply only to contracts with sufficient risk transfer; contracts without sufficient risk transfer belong to the business operation, subject to the provisions on business not related to insurance.
(2) Insurance undertakings that conclude finite reinsurance contracts or engage in finite reinsurance business must ensure that they can adequately identify, assess, monitor, manage, control, and report on the risks arising from those contracts or transactions.