The life insurance securitization market appears to be holding up reasonably well despite the turmoil in the mortgage-backed securities and municipal securities markets.
Tom Corcoran, a principal in the Hartford office of Towers Perrin Inc., said the turmoil in the other markets has increased the cost of life securitization deals and reduced insurers’ ability to increase the appeal of the securities by having bond insurers wrap the bonds.
Despite those challenges, “there’s been no apparent slowdown” in life securitization efforts, Corcoran said here Wednesday during a session at the annual disability insurance conference organized by JHA, Portland, Maine, a disability insurance research, consulting and reinsurance services unit of General Re Corp., Stamford, Conn.
Although bond insurers now are facing investor and regulator skepticism, “we expect the market to get back to normal pretty quickly,” Corcoran said. “I would guess in a year or two. There is a need for the monoline insurers that will be solved by the capital markets.” Meanwhile, one alternative to getting a monoline insurer guarantee is to make sure that one of the major investors in a deal is an organization with enough prestige to give other investors confidence in the deal, Corcoran said.
Several companies have used securitization to protect against catastrophic mortality risk.
Corcoran is expecting to see new deals involving long term care insurance risk, catastrophic disability risk and a variety of closed blocks.