There may be a slowdown in the insurance-linked securitiesmarket, which has provided capacity for insurers, because ofcurrent problems with monoline insurers who guarantee securities,according to an industry professional.

Chris Brockwell, director of insurance-linked securities withSwiss Re Capital Markets, New York., made his comments at a recentInvestment Symposium sponsored by the Society of Actuaries,Schaumburg, Ill.

Since 1997, approximately $47 billion in worldwide insurance andreinsurance capacity has been created through the issuance ofinsurance-linked securities, he said during the session,“Securitization: Issuer, Investor, Regulator &Administrator.”

Of total insurance-linked securities capacity of approximately$60 billion, roughly $25-to-$30 billion is non-life and $35-to-$40billion, life insurance related, said Mr. Brockwell.

And, he continued, new issuance in 2007 exceeded that of 2006 by50 percent .

A slowdown may occur, however, said Mr. Brockwell, because mostILS have relied on monolines' credit enhancements to complete dealsby bringing securities into the “AAA/Aaa”-rated category, heexplained.

To date, he explained, this model has worked, although nowinvestors are concerned about the monolines' exposure to subprimeproblems.

But it is possible that the current dislocation in the creditmarkets may also increase the flow of transactions where there arenonfinancial risks such as mortality or morbidity risks, headded.

The reason, according to Mr. Brockwell, is that there is alimited correlation with financial risks that could be appealing toinvestors who want diversification.

Securitizing embedded value in these insurance products is doneby determining the embedded value of future profits, according toMr. Brockwell's presentation.

With the embedded value financing model, typically there can bemore debt and higher leverage than with the traditional financingmodel because of the securitization, he noted. Leverage canincrease return on equity, he explained.

Jeffrey Bamundo, who works in the advisory services area ofPricewaterhouseCoopers, New York, discussed how managing asecuritization after the transaction has been completed is criticalfor the deal to be successful.

Unless care and preparation is taken, there can be unwanteddifficulties in managing the business associated with suchtransactions, he continued.

Care must be taken, Mr. Bamundo said, to avoid unneededcomplexity, communication weaknesses and lack of accountability, aswell as proper handling of accounting for the business.