Until relatively recently life companies generally met their capital needs either from internal resources or by means of equity capital provided by shareholders. However, the financial pressures on life operations have led to more innovative alternatives being used. In response to these pressures different forms of capital support from reinsurers, banks or other group funds or companies have been developed. In April 1998 National Provident Institution (NPI) became the first life company to issue bonds to investors secured on the future profits expected to arise from part of its existing life business. This paper discusses: financing options available to life companies; the terms of NPI's securitisation; the relative merits of different financing and capital management alternatives; alternative forms of capital support; the implications for policyholders and their interests; and actuarial issues arising from the different forms of financing.
