(C) “Financial risk insurance – a hedge vehicle to consider” OR “Get rid of the unnecessary risks”

A fundamental principle of the business management is assumption of only the business inherent, core risks. The financial loss insurance is a kind of a hedge instrument, which could be used to transfer credit and counterparty risk to third parties – insurance companies.

Once the risk assessment has been properly conducted, the rational pricing and meaningful diversification have been employed, such vehicles could be rather useful to the real economy. A deeper transparency in the economy comes as a second order effect if such products become widely recognized.

In parallel with the advantages of such instruments, several characteristics should be properly assessed: are there adequately tailored products for the emerging Bulgarian market; are there qualified actuaries and insurance brokers who have an excellent understanding of credit risk and counterparty risk; are the insurance premiums competitive compared to other financial products that could transfer those risks onto third parties?