Triple X is one subgroup in the broader life insurance securitization market. Total life insurance securitization reached roughly $18 billion in outstanding volume in mid-2007, with issuance of approximately $5 billion in 2006 and $2 billion year to date through June 2007. The life insurance securitization market divides into the following:
- Triple X securitization, which funds the regulatory capital requirement for level premium term life insurance policies. Deal terms may be as long as 30 years,
- Embedded value securitizations (also referred to as value-in-force monetization) release the profits “embedded” in future cash flows from a defined block of business,
- Catastrophic mortality bonds pay the issuer in the event of spikes in general population mortality by referencing a mortality index. These bonds can provide insurers with a level of protection that may not be available in the reinsurance market,
- and New business strain funding has been used to finance the upfront costs of writing new business by raising debt against future premiums.
Aside from the difference in motivation, embedded value and Triple X securitization differ in terms of collateral. Triple X transactions retain cash from the debt raised as collateral in the deal, whereas embedded value transactions are collateralized by future profits from a defined block of business.
Whereas Triple X securitization is specific to U.S. law, embedded value transactions have also been executed in the United Kingdom.