Welcome to the hotseat. We've prepared a guide if you'd like to read more about how it works.

How do global provisions help demonstrate solvency?

0 votes
asked Nov 9 in BUS 4027W - Actuarial Risk Management by Rowan (3,200 points)

The notes say that as well as establishing provisions for each contract, we also need to make global provisions by looking at the provider's liabilities as a whole, if solvency is to be demonstrated clearly. How does this bold part tie up with the rest of the statement?

1 Answer

0 votes
answered Nov 22 by LStandaar (180 points)

It is not always sufficient for companies to establish provisions for each individual contract separately. Therefore, the company might need to set up further global provisions based on the liabilities as a whole to be more certain of solvency in most events and not just under certain circumstances. Have a look at Question 35.10 and 35.11 for examples.