(1) Where an insurance undertaking or reinsurance undertaking concludes finite reinsurance contracts or pursues finite reinsurance activities, it must be able to properly identify, measure, monitor, manage,control and report the risks arising from those contracts or activities.

(2) For the purposes of paragraph (1), finite reinsurance means reinsurance under which the explicit maximum loss potential, expressed as the maximum economic risk transferred, arising both from a significant underwriting risk and timing risk transfer, exceeds the premium over the lifetime of the contract by a limited but significant amount, together with at least one of the following features:

(a) explicit and material consideration of the time value of money;

(b) contractual provisions to moderate the balance of economic experience between the parties over time to achieve the target risk transfer.