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Backing Long-term Insurance Liabilities with Non-fixed-income Assets
David Hong, FSA, CFA, Vice President; Vice President, TD Asset Management, TD Structured; Monish Arora, CFA, Vice President, TD Greystone; Carl Elia, MBA, CFA, Vice President & Director, TD Greystone
In designing hedging programs to back long-term life insurance reserve liabilities, the options available to Canadian insurers are limited due to the structure of the Canadian fixed income market. The availability of public bonds is greatly limited at the long end of the yield curve, particularly for corporate bonds that provide incremental spread over their government counterparts.
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