Life insurance companies are increasingly tapping the capital market directly, a trend expected to help improve their financial flexibility and credit quality, Standard & Poor's said Wednesday.
Life insurers have been seeking funding through "kikin," a type of subordinated debt particular to the industry, and through subordinated loans from closely linked domestic banks, S&P said.
In turn, insurers have frequently provided subordinated loans back to banks.
This practice has created a long-standing "double-gearing" problem of capital interdependence between insurers and banks.
But the rise of direct financing should lower domestic insurers' dependence on banks.
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