Life ILS: 2012 year in review and looking ahead to 2013

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By Alan Routhenstein, Steven I. Schreiber, Stuart Silverman | 19 February 2013

In 2012, an estimated US$12 billion in reserve financing transactions and embedded value (EV) transactions were completed. Most of these transactions involved the financing of excess reserves for U.S. life insurers selling level premium term insurance subject to Regulation XXX or universal life products with secondary guarantees (UL-SG) subject to Actuarial Guideline 38 (AXXX or AG38). The forms of financing continued to evolve in 2012.

In addition to the reserve financing transactions and the EV financing transactions, the life insurance-linked securities (ILS) market saw at least US$625 million in transactions to transfer catastrophic morbidity or mortality risk, and increased activity in the U.S. market (and continued activity in Europe) to transfer longevity and other pension risks.

This paper explores the Life ILS market in 2012, how the market is evolving, and what to expect in 2013.