Real Estate Swap
Transaction in which the property owner (for example, a pension fund) agrees to pay the insurance company a rate of return tied to the fluctuations in real estate prices. In return, the insurance company stipulates that it will pay the property owner a rate of return that is more predictable, such as a floating interest rate, if the insurance company believes that the depressed real estate market has an attractive potential for capital gains but has no desire to own and/or manage property. Meanwhile a pension fund owns more property than it deems prudent. The solution, through the swap, would entail the pension fund passing on to the insurance company any gains or losses generated by the property in return for the insurance company paying the pension fund a floating interest rate. This floating interest rate to be paid would be tied to a stipulated index such as the U.S. Treasury Bill rate. The result would be that the pension fund lowers its real estate portfolio to a more acceptable level, and the insurance company has increasing capital gains expectations.
Popular Insurance Terms
pool that contains various reinsurance companies with each sharing reinsurance contracts on a pro rata basis as they are submitted to the pool. market that operates much like the New York ...
Provision of marine insurance. It protects property damaged or destroyed as the result of the negligent acts of the crew. The name is derived from a steamer in which a pump was damaged by ...
Coverage on an all risks basis at any location for stamp and coin collections, excluding wear and tear, war, nuclear disaster, and mysterious disappearance. Usually each item is ...
System whereby the re insurer shares losses in the same proportion as it shares premium and policy amounts. Proportional reinsurance may be divided into the two basic forms: automatic ...
Trust to which a donor transfers assets and that distributes income to finance a predetermined situation. After the trust expires, any remaining assets are donated to the qualified charity ...
Arrangement in health insurance to discourage multiple payment for the same claim under two or more policies. When two or more group health insurance plans cover the insured and dependents, ...
Return of employer contributions to a pension if that plan is (1) newly established and is determined by the IRS not to be tax qualified; or (2) long established but the IRS disallows a ...
Roof used in construction that is composed of fire resistive materials such as slate as approved by the underwriters laboratories inc. (ul). ...
Claim, such as a worker's lien, to property under the care, custody, and control of another. This situation occurs when a worker is not paid for labor provided. For example, a carpenter ...
Have a question or comment?
We're here to help.