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
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Policy not designed to pay the policyowner a dividend. ...
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Risk incurred by the insurance company after it makes the commitment to make the loan at some future time and the borrower may not accept the loan at that time. ...

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