Insurance: industry CFOs focus on managing capital.Seven of 10 North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. life insurance company CFOs consider capital management to be a key concern for them today and expect that to continue over the next three to five years, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. a CFO See Chief Financial Officer. survey of the Tillinghast business of Towers Perrin. The survey showed that CFOs' concerns about current and future availability of capital are driving nearly one-third (30 percent) of respondents to actively explore one or more alternatives for raising capital. The survey, involving more than 70 life insurance CFOs, focused on issues related to managing and raising capital. Nearly all (93 percent) respondents said that maintaining and growing new business is a major source of demand on capital, followed by rating agency demands (59 percent), facilitating non-organic growth (56 percent) and regulatory issues (44 percent). The survey found that many CFOs are actively considering nontraditional sources of managing capital, such as reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. and securitization Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. . While authorized (57 percent) and offshore reinsurance (44 percent) are currently the most popular means of addressing capital needs, securitization is showing a dramatic increase in popularity. Only 4 percent of respondents currently use securitization to address capital needs, but 50 percent said they will consider it in the next two to three years, ranking it second only to reinsurance. Beyond securitization, respondents said they are considering surplus notes (73 percent), trust preferred securities (40 percent) and funding agreements (13 percent) as other sources for obtaining capital in the next two to three years. "We believe that the growth in popularity of securitization as a means of financing risks is the confluence of two trends," said John Nigh nigh adv. nigh·er, nigh·est 1. Near in time, place, or relationship: Evening draws nigh. 2. Nearly; almost: talked for nigh onto two hours. , Tillinghast managing principal and M & A practice leader. "The first is stronger reinsurance pricing and the second is the willingness of the financial markets to provide funds for these securitizations." "CFOs' use of alternative methods for better capital management highlights the increasing demands placed on life insurers by third parties, such as analysts and rating agencies, to achieve steady growth in GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). earnings and GAAP ROEs (returns on equity) over time," said Hubert Mueller, principal and survey leader. In fact, one of the primary reasons respondents use reinsurance is to reduce earnings volatility (54 percent), while 50 percent use securitization to enhance their GAAP ROE. |
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