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
Ownership of tax-free or tax-deferred investments by a child or for a child, given that these investments will not reach maturity before the child attains at least age 14. The objective is ...
Same as term Funded Pension Plan: plan in which funds are currently allocated to purchase retirement benefits. An employee is thus assured of receiving retirement payments, even if the ...
Insurance for private pleasure boats. Coverage is not standard, but is generally broken down into insurance for yachts, including sailboats; boats with inboard motors under marine ...
Termination of a contractual obligation for immediate performance. For example, under the homeowners insurance policy, if the insurer refuses to pay a claim, the insured (if not satisfied ...
To which the original investment sums build at a stipulated interest rate. ...
Automobile purchased or leased by the insured or the insured's spouse that takes the place of the insured or the insured spouse's present car as covered in the personal automobile policy ...
Actuarial procedure used to determine the annual rate of return at which annual benefits would have to be gained from the cash value life insurance policy in order to equal the annual ...
Model state law of the NAIC that stipulates that the total sum of medium grade bonds (bonds carrying a rating of 3, assigned by the Securities Valuation Office of the NAIC) and lower grade ...
Fronted program by the insured acquires a licensed insurance company to issue insurance policies. ...
Have a question or comment?
We're here to help.