In 2013 and thus far in 2014, we estimate that over USD 15 billion in reserve financing and embedded value (EV) financing transactions were completed, in spite of extensive discussions at the National Association of Insurance Commissioners on the use of captives to finance excess reserves. 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 subject to Actuarial Guideline 38. The forms of financing continued to evolve in 2013.

In addition to the reserve financing transactions and the EV financing transactions, in 2013 and thus far in 2014 the market saw at least USD 530 million in transactions to hedge catastrophic morbidity or mortality risk, and continued activity in the market to hedge longevity and other pension risks.

This paper explores the Life insurance-linked securities market over the past 18 months and looks ahead to the remainder of 2014.