Defined terms for the annuity market and lifetime income landscape.
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.
Expense loading is the component of an annuity's pricing that recovers the carrier's acquisition costs, ongoing administration costs, and distribution compensation, built into the premium or income calculation rather than charged as a separate fee.
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.
GAAP versus statutory accounting is the structural comparison between the two parallel financial-reporting frameworks US insurance carriers operate under — GAAP for investors and statutory accounting for regulators — which produce materially different reported figures for the same business.
