Risk-mitigating effect

The risk-mitigating effect on underwriting or market risks of a reinsurance arrangement, securitisation or derivative shall be the difference between the following capital requirements:

(a) the hypothetical capital requirement for underwriting or market risk of the insurance or reinsurance undertaking that would apply if the reinsurance arrangement, securitisation or derivative did not exist;

(b) the capital requirement for underwriting or market risk of the insurance or reinsurance undertaking.