Insurers weigh the pros and cons of total return swaps

With many pension funds needing to boost returns to make up poor funding levels while balance sheets remain at a premium, the total return swap market has grown in leaps and bounds. But there are some who see a familiar story of banks pushing products while ignoring the risks. Laurie Carver reports

Asset classes have been moving together

In the wake of the financial crisis, pension funds in many jurisdictions have been struggling with below-par funding ratios and the resultant simultaneous need to take on more risk while shelling out less of their balance sheet.

A total return swap (TRS) is one way of getting that exposure without the initial capital outlays (see figure 1 and box, page 35). The return on some given reference asset - coupons, dividends and mark-to-market changes - is swapped in exchange for a floating rate

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The future of life insurance

As the world constantly evolves and changes, so too does the life insurance industry, which is preparing for a multitude of challenges, particularly in three areas: interest rates, regulatory mandates and technology (software, underwriting tools and…

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