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October 24, 2001 at 08:00 PM
NU Online News Service, Oct. 24, 1:45 p.m. – Life insurance companies are increasingly turning to securitization to improve their capital use and improve earnings, Standard & Poor, New York, says in a new report.
Securitization is the process of selling future income streams to outside investors in return for a lump-sum payment.
“In the past, insurers have both created insurance products and kept them on their balance sheets, rather like being a manufacturer and a warehouser of the same product,” says Jay Dhru, a director with S&P’s financial services ratings group.
Critics suggest poorly managed securitizations may eat into overall, long-term profitability.
