Phase 5: Optimising the pool

Phase 5 steps

Step 11: Adjust the Financial Structure

It is likely the user will have to run the tool multiple times to get the best structure for a given budget.

Guidance

  1. Identify the biggest country risk liabilities on the Pool Analysis tab of the Risk Pool Structuring tool.

  2. Return to Financial Structure Input tab and adjust up or down:

  • Attachment/Exhaustion points

  • Ceding Percentage

  • Reinstatements

  • Aggregate limit

  1. Re-run the structure by pressing Run Model - every time the user makes adjustments they will need to run the model - and return to the country and pool analysis tabs to consider the new results, until:

  • The pool funding requirement is within budget

  • The coverage is maximised while staying within the risk appetite on solvency

  • The coverage needs requested from countries are balanced with affordability within the available funding

These decisions will need to be within the frame of the overall governance of the systems and should be fully transparent and accountable.

Step 12: Finalise and Communicate

Once the user has a workable design for the risk pool, they should document and clearly explain off-tool decisions, including:

  1. Data sources, distribution fitting, and limitations

  2. Why certain ceding percentages or triggers and structures were chosen

  3. Funding availability, reinsurance decisions, and any residual risk

  4. Utilise the graphs and tables in a structuring report

Transparency, fairness, and accountability are crucial. Communicate in accessible, culturally sensitive ways—especially around numerical probabilities and value judgments. Remember what the numbers are actually relating to in crisis and be mindful and respectful in how you communicate that in difficult decisions that often have to be made.