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
Facility that provides short periods of stay for a terminally ill person in a homelike setting for either direct care or respite. A "terminally ill" person has a life expectancy of six ...
Company organized with the business objective of providing claims adjustment services to insurance companies that do not have an internal claims department. ...
Insurance company that is licensed by a state to market and service particular lines of insurance in that state. ...
Clause in an insurance policy stipulating that the benefits under the policy will accrue to the right of the insured. For example, if the insured leaves a violin at a repair shop and that ...
Social insurance that provides benefits to temporarily disabled workers in a few states. Five states require employers to pay cash benefits if workers are disabled. They are Rhode Island, ...
Index that reflects changes in industrial output by manufacturers, mines, electric utilities, and natural gas utilities. This is a monthly index published by the Federal Reserve. ...
Group that monitors government health insurance programs. Authorized by the 1972 amendment to the Social Security Act, PSROs were set up to cut costs and minimize abuses by checking on the ...
Insurance for which (1) an application has been filed but the first premium has not yet been paid or (2) a life insurance policy that has not yet been delivered to an insured. ...
Insurance company that is organized under the state laws by which the company is licensed and that is called a domestic insurer. Also, this insurance company may be chartered and licensed ...
Have a question or comment?
We're here to help.