https://www.insurerbrain.com/w/index.php?action=history&feed=atom&title=Definition%3ASecurities_lending 2026-04-30T07:13:12Z Revision history for this page on the wiki MediaWiki 1.43.8 https://www.insurerbrain.com/w/index.php?title=Definition:Securities_lending&diff=9868&oldid=prev 2026-03-11T05:54:50Z

<p>Bot: Creating new article from JSON</p> <p><b>New page</b></p><div>📊 &#039;&#039;&#039;Securities lending&#039;&#039;&#039; is a transaction in which one party temporarily transfers ownership of [[Definition:Securities | securities]] — typically bonds or equities — to a borrower in exchange for [[Definition:Collateral | collateral]] and a fee, and it represents a meaningful source of incremental [[Definition:Investment income | investment income]] for [[Definition:Insurance carrier | insurance companies]] that hold large, relatively static portfolios to support [[Definition:Loss reserve | loss reserves]] and [[Definition:Policyholder surplus | policyholder surplus]]. Because insurers are among the world&#039;s largest institutional asset holders, their securities lending programs can be substantial, generating revenue that contributes to overall profitability without altering the insurer&#039;s long-term investment strategy.<br /> <br /> ⚙️ In a typical arrangement, the insurer (the lender) makes a block of bonds or stocks available through a lending agent — often a custodian bank — to counterparties such as hedge funds or broker-dealers that need the securities for short-selling, settlement, or market-making. The borrower posts collateral, usually cash or government securities, valued at 102–105% of the loaned securities&#039; market value, and this collateral is marked to market daily. The insurer earns a lending fee and, when cash collateral is received, can reinvest it in short-term instruments for additional yield. Regulatory frameworks like the [[Definition:National Association of Insurance Commissioners (NAIC) | NAIC]] Model Act and [[Definition:Solvency II | Solvency II]] impose limits on the percentage of an insurer&#039;s portfolio that can be on loan and prescribe acceptable collateral types, ensuring that [[Definition:Solvency | solvency]] is not compromised by counterparty default.<br /> <br /> ⚠️ The risks, while manageable, are real. If a borrower defaults and the collateral has depreciated, the insurer may not fully recover the loaned securities&#039; value — a scenario that materialized for several insurers during the 2008 financial crisis when reinvested cash collateral was tied up in illiquid [[Definition:Mortgage-backed securities | mortgage-backed instruments]]. Since then, insurers have tightened collateral standards, shortened reinvestment durations, and enhanced [[Definition:Counterparty risk | counterparty risk]] monitoring. For insurance investment teams, a well-governed securities lending program remains an efficient way to extract incremental returns from existing assets, but it requires robust [[Definition:Risk management | risk management]] oversight and clear alignment with the insurer&#039;s broader [[Definition:Asset-liability management (ALM) | asset-liability management]] strategy.<br /> <br /> &#039;&#039;&#039;Related concepts:&#039;&#039;&#039;<br /> {{Div col|colwidth=20em}}<br /> * [[Definition:Investment income]]<br /> * [[Definition:Collateral]]<br /> * [[Definition:Counterparty risk]]<br /> * [[Definition:Asset-liability management (ALM)]]<br /> * [[Definition:Solvency II]]<br /> * [[Definition:National Association of Insurance Commissioners (NAIC)]]<br /> {{Div col end}}</div>

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