Insurance and Interest rate risk: Difference between pages

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1.  ''Risk management - transferring & pooling risk - commercial.''
The risk associated with a change in interest rates.  


A contract designed to provide protection against specified types of risk or loss, by paying out to the insured party in the event that the insured loss occurs.
Insurance is generally provided by specialist insurance companies, to whom an insurance premium is paid by the insured in advance.


This may take several forms in the treasury context.


2. ''Risk management - transferring & pooling risk - commercial.''
For example, and depending on the direction of the change:
*Increasing interest cost
*Falling interest income
*Changing market value of debt, or of pension liabilities
*Differences in competitiveness
*The changing nature of a market when interest rates change
*Secondary effects, especially potentially adverse effects, resulting from any of the primary effects above. For example, potential breaches of interest cover covenants.


The act or structure of providing insurance on a commercial basis, or of buying it.


Sometimes written 'interest-rate risk'.


3.  ''Risk management - market stability - regulation.''


The actions or structures of a regulator or supervisor to ensure market stability, whether or not they are provided on commercial terms.
== See also ==
* [[Asset-liability management]]
* [[Cross-currency interest rate swap]]
* [[Double-whammy]]
* [[Exposure]]
* [[Fair value interest rate risk]]
* [[Financial covenant]]
* [[Forward rate agreement]]
* [[Guide to risk management]]
* [[Interest cover]]
* [[Interest rate]]
* [[Interest rate cap]]
* [[Interest rate collar]]
* [[Interest rate exposure]]
* [[Interest rate floor]]
* [[Interest rate futures]]
* [[Interest rate gap]]
* [[Interest rate guarantee]]
* [[Interest rate option]]
* [[Interest Rate Risk in the Banking Book]]  (IRBB)
* [[Interest rate shock]]
* [[Interest rate swap]]
* [[IRHP]]
* [[Matching]]
* [[Pipeline risk]]
* [[Portfolio hedging]]
* [[Risk-free rate of return]]
* [[Risk-free rates]]
* [[Shock]]
* [[Time bins]]


For example, the liquidity insurance provided by the Bank of England in acting as a lender of last resort for banks and other financial market participants.


Retail deposit insurance is another example.
== Other resource ==


[[Media:2015_05_May_-_The_devil_is_in_the_detail.pdf| The devil is in the detail, The Treasurer, 2015]]


== See also ==
[[Category:Manage_risks]]
* [[After the event insurance]]
* [[Assurance]]
* [[Captive insurance company]]
* [[Chartered Insurance Institute]]
* [[Credit insurance]]
* [[Deposit insurance]]
* [[European Insurance and Occupational Pensions Authority]]  (EIOPA)
* [[Excess]]
* [[Financial Conduct Authority]]
* [[Fixing instrument]]
* [[Force majeure]]
* [[GI]]
* [[Hedging]]
* [[HMO]]
*[[International Association of Insurance Supervisors]]  (IAIS)
* [[ILS]]
* [[Insurable]]
* [[Insurance Capital Standard]]
* [[Insurance risk]]
* [[Insure]]
* [[Lender of last resort]]
* [[Liability insurance]]
* [[Liquidity insurance]]
* [[National Insurance]]
* [[Net-Zero Insurance Alliance]]
* [[Option]]
* [[Premium]]
* [[Price walking]]
* [[Principles for Sustainable Insurance]]
* [[Regulation]]
* [[Reinsurance]]
* [[Risk]]
* [[Risk management]]
* [[Risk response]]
* [[Supervision]]
* [[Trade credit insurance]]
* [[Transfer]]
* [[Trustee liability insurance]]
* [[Underwriting]]
 
[[Category:Financial_risk_management]]

Revision as of 20:02, 1 May 2022

The risk associated with a change in interest rates.


This may take several forms in the treasury context.

For example, and depending on the direction of the change:

  • Increasing interest cost
  • Falling interest income
  • Changing market value of debt, or of pension liabilities
  • Differences in competitiveness
  • The changing nature of a market when interest rates change
  • Secondary effects, especially potentially adverse effects, resulting from any of the primary effects above. For example, potential breaches of interest cover covenants.


Sometimes written 'interest-rate risk'.


See also


Other resource

The devil is in the detail, The Treasurer, 2015

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