Life Insurance Securitization - The Actuaries' Club of the Southwest

The actuary’s role involves designing a soundfinancial model of the securitized business• Primary modeling requirement is a good model of thesecuritized business, capable of projecting cash flows overa period at least equal to the term of the debt• Securitization is non-recourse debt• Debt payments are contingent on sufficient cash flowsemerging from the securitized business• Over-collateralization provides a “buffer” against adversedevelopments in experience• The debt issuer uses the model to demonstrate the amountof collateral available to service the debt• Typically run under a baseline assumption set and awide range of “stress” tests; can the debt be servicedeven under adverse scenarios?©Towers Perrin22