Securitizations in the European insurance sector should become more common in the coming year, say London-based analysts and bankers. After the success of the recent Gracechurch Life Finance transaction lead managed by Barclays Capital, more insurance companies in Europe and the U.K. are inquiring about transferring risk and monetizing profits via securitization. One rating agency official says he has had at least 20 inquiries about possible insurance-related securitizations since Gracechurch Life hit the market in October (BW, 10/13). The £400 million deal securitized profits generated by New Barclays Life, an insurance arm of Barclays Bank. An insurance industry analyst says that insurers who close down their life businesses are good candidates for this type of deal. Using securitization is a good way to release capital from closed life business and redeploy it in growth areas in the firm, he says.
"We're seeing a lot of interest in structuring these types of deals from U.K. and European bank assurers," says one banker in London who specializes in balance sheet management. He says insurance issuers have different motivations for pursuing a securitization. Capital relief, risk transfer and solvency considerations are a few reasons insurers might consider such a deal.
Prior to Gracechurch Life, the only other European insurance securitization that monetized futures profits was from National Provident Institution (NPI) in 1998. As a result of NPI being downgraded, the deal has underperformed. Gracechurch Life had a more transparent structure and a wrap from Ambac Financial Group.