Life Insurance Securitizations: Legal Structures for Statutory Reserve Financings and Embedded Value Monetizations

Abstract

Life insurance-based securitizations have been making their presence known in the market for less than a decade, and yet the legal and structural technology that goes into these deals has become increasingly standardized, so that the same basic structure can be successfully applied in a variety of contexts. This article provides a brief overview of statutory reserve financings and embedded value monetizations, which are the two types of life insurance-based securitization that have predominated in the market to date. Statutory reserve financings and embedded value monetizations differ from each other in important ways. However, both types of transaction share important structural features, including those, explained in the article, that serve to highlight the distinction between these transactions and more traditional forms of securitization. The article concludes with a description of the basic structural building blocks of both types of life insurance-based securitization, and some thoughts on the prospects for the market.

TOPICS: Legal and regulatory issues for structured finance, legal/regulatory/public policy