The Data Protection Directive is a European Union (EU) directive used as the basis for the data protection laws of all EU member states that prohibits the transfer of personal data to countries without “adequate” data protection. While the EU Commission has never officially stated that the United States does not provide “adequate” data protection, it has always been clear that the patchwork of privacy laws in the United States would not meet the Commission’s criteria for adequacy. As a result, the Commission and the US Department of Commerce, shortly after the passage of the Directive, began negotiations to create a program that would allow US companies to overcome the ban and transfer personal information from EU member states to the United States. The result of these negotiations was the Safe Harbor program, which provides a limited “compliance” conclusion to US member companies for the purposes of EU data protection law.
Insurance is a contractual relationship that arises when one party (the insurer), for a fee (premium), agrees to compensate the other party (the insured) for losses caused to a certain subject (risk) caused by certain unforeseen circumstances (hazards or dangers). The term ‘guarantee’, commonly used in England, is considered synonymous with ‘insurance’.
The 10/10 Rule is a matter of analyzing and demonstrating the transfer of risk as a precondition for the use of reinsurance accounting, which was codified in the early 1990s with the adoption of Financial Accounting Standard (FAS) 113 (and its statutory counterpart, SSAP 62). FAS 113 itself was a response to alleged abuses and set the standard for testing whether something should be called an insurance contract. FAS 113 required that the transfer of risk be demonstrated by comparing the present value of the cash flows associated with the contract and, in particular, by exceeding certain thresholds of “significance” of risk. The thresholds, often referred to as the 9a and 9b tests, are: 9a. The reinsurer assumes significant insurance risk under the reinsured parts of the underlying insurance contracts. 9b. It is possible that the reinsurer could suffer a significant loss from the transaction. While neither “significant” nor “reasonably possible” was defined in this context, standard rules of thumb quickly emerged in the implementation of FAS 113. The most commonly cited is the “10/10 Rule”. This rule states that a contract reaches a threshold if there is at least a 10 percent chance that it will suffer a loss of 10 percent or more in present value (expressed as a percentage of the contract premium ceded).