Defined terms for the annuity market and lifetime income landscape.
Company action level is the first regulatory intervention threshold under the US risk-based capital framework, triggered when an insurance carrier's risk-based capital ratio falls below two hundred percent and requiring a corrective action plan submitted to the state insurance commissioner.
Deferred acquisition cost (DAC) is the GAAP balance-sheet asset created when an insurance carrier capitalizes the costs of acquiring new business — commissions, underwriting, issue expenses — rather than expensing them, with the asset amortized against the revenue stream over the contract life.
Duration matching is the asset-liability management practice of structuring an asset portfolio so the weighted-average timing of its expected cash inflows aligns with the timing of the carrier's income obligations, so the two sides of the balance sheet respond to rate changes in tandem.
Excess of loss reinsurance is a non-proportional structure in which the reinsurer pays only when losses on a defined block exceed a specified retention amount, and pays up to a specified limit above that retention.
Funds withheld reinsurance is a reinsurance structure in which the reinsurer assumes a share of insurance risk while the supporting assets remain on the ceding carrier's balance sheet in a designated account, credited to the reinsurer's account through the treaty.
