NERA Affiliated Consultant Gary Lambert wrote the chapter “Using the Actuarial Approach to Price Guarantees” in Applying the Arm’s Length Principle to Intra Group Financial Transactions: A Reference Guide. The chapter describes the methodology of the actuarial approach and how it assesses the losses a guarantor will have to face in the context of a binding guarantee agreement. Mr. Lambert explains how the price of the guarantee is estimated by calculating the cost of earmarking capital to cover expected and unexpected losses linked to the guarantee arrangement.

Order Applying the Arm’s Length Principle to Intra Group Financial Transactions: A Reference Guide from Wolters Kluwer here.