Rating analysts at Standard & Poor’s Ratings Services, New York, are expecting to see a big increase in life insurance securitizations.[@@]
Securitization is the process of packaging risk in securities and selling the securities to investors.
Up till now, insurers have securitized $7.3 billion in natural peril catastrophe risk but only about $1.6 billion in life insurance risk.
But regulators’ efforts to increase the level of capital backing life and annuity contract guarantees should favor growth in life securitizations, according to Grace Osborne, an S&P managing director.
On the life side, “these transactions are largely fueled by companies responding to reserving requirements,” Osborne said during a recent conference sponsored by Standard & Poor’s, according to S&P’s note on the conference.
Any easing of actuarial requirements could slow growth in life securitizations, but but the trends favor stricter rules, Osborne said.
Other S&P analysts talked about life securitization rating considerations.