Milliman provides expert assessment to financial guarantors when they offer credit enhancement to securitization transactions. We have assisted most of the financial guarantors currently involved in insurance industry securitizations.

Clients depend on us to identify risks in complex transactions

We assist financial guarantors in identifying and analyzing transaction risks, impartially assessing the issuer’s projection models and assumptions.

We then examine baseline transaction cash flows to identify risks. We perform stress testing to provide insight on how the subject business might perform under various scenarios and help financial guarantors define deal mechanisms, such as capital lock-ups, to limit their exposure to adverse events.

Finally, we review the reinsurance treaty and other transaction documents to make sure they accurately reflect the negotiated agreement.

Guarantors, who play an important role in insurance industry securitizations, depend on Milliman's 30 years of industry experience to guide them through these complex transactions.

Helping a financial guarantor assess risk

In one securitization deal, Milliman identified several issues that helped the financial guarantor evaluate the transaction's risks. Our initial review found the guarantor was provided with an oversimplified model that would have yielded incorrect conclusions. As a result, we developed a more sophisticated, precise model. We also found mortality assumptions were potentially too low, leaving the guarantor exposed to unanticipated risk. We defined a higher mortality assumption to provide the financial guarantor with a more realistic view of these risks. Finally, we identified potential risks to the guarantor associated with options granted to policyholders. We then assisted in the negotiation of additional "lock-up" mechanisms to protect against those risks.