Identification and Valuation of Embedded Derivatives in Modified Coinsurance and Similar Insurance Arrangements

Life Financial Reporting Committee practice note describing some of the common practices that might be considered by actuaries in the United States in the application of the Financial Accounting Standards Board’s (FASB) Derivatives Implementation Group Statement 133 Implementation Issue No. 36, Embedded Derivatives: Modified Coinsurance Arrangements and Debt Instruments That Incorporate Credit Risk Exposures That Are Unrelated or Only Partially Related to the Creditworthiness of the Obligor under Those Instruments (DIG B36). DIG B36 addresses the applicability of FAS 133 to many modified coinsurance (Modco) and similar insurance transactions.