Real Estate Swap
Transaction in which the property owner (for example, a pension fund) agrees to pay the insurance company a rate of return tied to the fluctuations in real estate prices. In return, the insurance company stipulates that it will pay the property owner a rate of return that is more predictable, such as a floating interest rate, if the insurance company believes that the depressed real estate market has an attractive potential for capital gains but has no desire to own and/or manage property. Meanwhile a pension fund owns more property than it deems prudent. The solution, through the swap, would entail the pension fund passing on to the insurance company any gains or losses generated by the property in return for the insurance company paying the pension fund a floating interest rate. This floating interest rate to be paid would be tied to a stipulated index such as the U.S. Treasury Bill rate. The result would be that the pension fund lowers its real estate portfolio to a more acceptable level, and the insurance company has increasing capital gains expectations.
Popular Insurance Terms
Deleveraging of the insurance company's balance sheet. ...
Insurance that offers blanket coverage up to a certain dollar amount on all property of the classification covered by the policy. Floater policies, which cover property wherever it happens ...
Model state statute that governs terms for surrender of individual deferred annuities and cash value life insurance. This model, adopted by most states in the late 1970s and early 1980s, ...
Duration of a policy. Property and casualty coverages are usually written for one year, although a personal automobile policy can be for six months. Life insurance can be written on a term ...
Attachment to an insurance policy to complete its coverage. For example, the Standard Fire Policy must have certain forms attached for it to provide the coverage desired. ...
Same as term cash surrender value: money the policyowner is entitled to receive from the insurance company upon surrendering a life insurance policy with cash value. The sum is the cash ...
Same as term Maximum Foreseeable Loss: worst case scenario under which an estimate is made of the maximum dollar amount that can be lost if a catastrophe occurs such as a hurricane or ...
Policy clause that excludes coverage for loss of property if the cause of the loss cannot be identified. Mysterious disappearance is an exclusion in a standard inland marine insurance ...
Coverage for paintings, pictures, etchings, tapestries, art glass windows, antique furniture, coin collections, and stamp collections owned by individuals and businesses. These works are ...
Have a question or comment?
We're here to help.