What does Disintermediation Risk mean? Read on to discover the definition & meaning of the term Disintermediation Risk - to help you better understand the language used in insurance policies.
Refers to the potential that policyholders may relinquish policies due to rising interest rates. If interest rates rise too rapidly, then policyholders may surrender policies faster than expected, potentially resulting in cash flow obligations that exceed returns on investment assets. Alternatively, during persistent periods of low interest rates when policy surrender rates tend to decrease, insurers face the risk that investment returns will decline to the point that they are unable to service ongoing liabilities. In either scenario, the sensitivity of investment income and policy obligations to interest rate changes could have a considerable impact on equity value.
We hope the you have a better understanding of the meaning of Disintermediation Risk.