Risk transfer in re-insurance determines accounting treatment, while inseparable financing components are treated as financial transactions.

Re-insurance contracts must meet risk-transfer requirements and protect the ceding insurer or retrocessionaire from negative financial effects arising from ceded insurance business. In alternative risk transfer arrangements combining re-insurance and financing, separable components must be accounted for individually. Where they are inseparable, the entire arrangement must be treated as a financial transaction. Accounting must follow substance over form and applicable accounting standards.

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