A.M. Best Releases Draft Methodology on Rating Life-Related Premium Financing Loan Securitizations

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August 18, 2010 Wednesday 04:28 PM EST

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A.M. Best Releases Draft Methodology on Rating Life-Related Premium Financing Loan Securitizations

Rachelle Morrow

OLDWICK, N.J.

A.M. Best Co. is requesting comments from market participants in the insurance industry and other interested parties on its proposed release of the methodology, "Rating Life-Related Premium Financing Loan Securitizations." The draft document is currently available in the Best's Credit Rating Methodology section of Best's Ratings and Analysis Center. Visit http://www.ambest.com/ratings/methodology.asp to download a PDF copy.

In a typical premium financing transaction, a borrower takes out a loan from a premium financing lender to pay life insurance policy premiums, refinance an existing policy loan, pay fees/expenses related to the loan and pay interest costs associated with the loan. In the particular type of premium financing discussed in this methodology, the loan is generally collateralized by the life insurance policy and related benefits (such as death benefits and cash surrender value), letters of credit and liquid assets. In the premium financing loans described in this document, the lender generally does not consider mortality or longevity risk in the decision to make the loan.

This methodology discusses A.M. Best's considerations in rating the securitization of a pool of premium financing loans. The special purpose vehicle which houses the premium financing loans (or participation interests in such loans) issues securities to investors, and those securities are effectively collateralized by the loans.

A.M. Best will consider feedback from any interested parties prior to publishing this methodology. Written comments can be submitted by email to [email protected] no later than September 8, 2010.

August 19, 2010

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