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
Transaction in which the ceding company pays a premium and is guaranteed certain future payments to fund future losses. If losses are less than was expected, the ceding company receives a ...
Addition to reflect exposures with a greater probability of loss than standard exposures. For example, insuring a munitions factory obviously requires a premium greater than that required ...
Method of selling insurance directly to insureds through a company's own employees, through the mail, or at airport booths. The company uses this method of distribution rather than ...
Associated insurers that are under common stock ownership or interlocking directorates. Such an arrangement makes it easier to exchange insurance products for sale to the consumer, reduces ...
Payment for coverage that remains throughout the same premium-paying period. ...
Deductible that applies for the year. For example, a business pays for the first $40,000 of losses incurred during the year and the insurance company pays for all losses above that amount ...
State law that stipulates that the worth of separate accounts must be valued at current market with the exception of those separate accounts established and maintained for guaranteed ...
Monetary sum paid to an intermediary who acts as the contact between the lender (an insurance company) and the borrower. ...
Government reinsurance program that provided coverage for U.S. properties during World War II. Private insurers shared the first layer of coverage, with the government providing ...
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