Interest Rate Swap
Definition of "Interest rate swap"
Contractual agreement between two parties in which they agree to exchange a stream of interest payments on either a fixed rate for a floating rate or a floating rate for a fixed rate. The insurance company is most likely to select a floating rate for a fixed rate because it needs to know exactly what it will be paying in future interest. In this way, the insurance company can hedge its interest rate exposure (risk that interest rates will rise or fall at some stipulated time), reflected by changes in the value of its assets on the balance sheet.
Popular Insurance Terms
Legislation passed in California that establishes procedures applicable to any worker who incurs a job-related injury. This act has far-reaching implications for workers compensation ...
Insurance policy sold by nonadmitted insurer. ...
Method of calculating the life insurance policy's cash surrender value (CSV) not contingent upon the calculation of the policy's reserve such that the CSV will approximate the asset share ...
Formal process of setting aside funds on a mathematical basis to provide deferred income benefits. ...
Exchange of a new policy for one already in force. ...
Condition in which life insurance sales increase at a rate greater than the general rate of growth of the economy. As a society moves from an agriculture-based economy to an industry-based ...
Table charting relative costs of a group of cash value life insurance policies derived by using the net cost method of comparing costs (traditional net cost method of comparing costs; net ...
Loss occurring by accident or chance, not by anyone's intention. Insurance policies provide coverage against losses that occur only on a chance basis, where the insured cannot control the ...
Claim by the pension benefit guaranty corporation (PBGC) against an employer for reimbursement of the PBGC's loss (for a terminated plan) up to 30% of the net worth of the employer. If this ...
Have a question or comment?
We're here to help.