Suggestions for Practical Standards

Low rate-on-line tests

Clause test

"Experience test"

I suggest that auditors be clear that some "sleep-at-night" covers clearly transfer risk. Possible examples:

5% rate-on-line, with one reinstatement at 100%?

10% rate-on-line, no APs?

Statutory WC covers at 0.1% of standard?

Clause Test

Is every clause of a treaty can be written on a standard cover note, without unusual and detailed explanation, the treaty transfers risk .

A more actuarial application uses a similar reasonong ...

"Experience" Test

1. Count the number of times the world "experience' appears in a cover note.


2. Express the limit of the treaty as a numeral, and count the numbers of zeroes.


3. If result #1 is greater than result #2, the transaction does not transfer risk