Many investors with large portions of interest-only and credit-sensitive securitized assets, such as subordinated and equity tranches of CDOs, will be tempted to securitize these exposures via off-balance-sheet synthetic structures in the near-term, analysts said.

This is primarily because market valuations of riskier assets are expected to fall, perhaps substantially, which could make write-downs associated with Emerging Issues Task Force (EITF) 99-20 even more profound a problem for insurance company investors than prior to the fall of the World Trade Center.

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