Building Permanent Structures to Address XXX Reserves

12/2013

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It has been a decade since the height of the term wars, when many life companies were selling policies at lower and lower rates and coinsuring the risk with reinsurers. Carriers then came to believe that they were leaving short-term profits on the table. They began to retain higher levels of risk in anticipation of financing future peak reserve strain through securitization. The market collapse in 2008 derailed these plans. Today a number of companies are seeing their books of term business reach peak reserve strain. To compound the challenge, the timing of the peak coincides with the maturity of many “longer-term” (i.e., 5-7 year) letters of credit and other financing solutions that life insurers considered stopgaps on the way to securitization.

 

  • Scott Boug (SGLA)

The Messenger

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