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Funding risk

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Funding risk
The risk associated with the impact on a project's cash flow from higher funding costs or lack of availability of funds. See: interest rate risk.

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If a project's funding risk changes, it can be compared and contrasted with other programs' sensitivity to change.
The advantage of the pre-funding scenario is that it transfers future funding risk to the capital markets at the inception of the transaction but has the disadvantage of reinvestment risk (negative carry) until the funds are fully deployed in the reinsurance trust.
There are, of course, several practical obstacles to funding risk reserves or "planning for pain.
 
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