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Old 08-09-2005, 06:26 PM
johnny storm johnny storm is offline
Join Date: Jul 2004
Posts: 4,312

That's accurate, MA, but not the only reason (it sort of sounds like you're saying that's the only way they were used), you can also do it to transfer liabilities off your books to get a better rating. For example, if you have $100 million in asbestos liabs on your books, and they are risky enough that you get a lower rating, you can sell them to Swiss Re - you bolster your rating so that you can sell more business, while it's not big enough to hurt Swiss Re much.

There's other reasons, but basically, you have liabilities associated with future payments and you pay somebody to take them away.
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