In going the recourse route, do insurers face less pressure to conform to capital markets practices?
That is not necessarily the case. The widely-held view throughout the capital markets is that deals are expressed through contracts, they should be followed to the letter, and rights should be enforced diligently. Can you comment generally on “business culture” differences between life insurers and the capital markets? I don’t think it’s a difference in culture as much as in business goals. Insurers want guaranteed long-term reserve funding that is economical, efficient and results in appropriate capital and rating agency treatment. They also want to limit the number of conditions under which the lending facility could be accelerated. The capital markets want to have securities that they can sell quickly and easily. They want the transaction to be easy to understand and without credit risk. In most non-recourse deals, this means going to a financial guarantor that is willing to assume what is essentially the true risk of the business by guaranteeing timely payment on the policy-backed
