I have heard that insurance companies make use of swaps and am just trying to get some clarity on that:
An insurance company (assume life insurance) has a fixed obligation to pay in the distant future (policy holder's death), ie. a substantial fixed lumpsum. For that the company receives from the holder (monthly) premiums (are these fixed or floating?).
How does it use swaps? If the premiums are fixed, then it could exchange those for floating with an interest-rate swap, but to what end? How exactly do they use swaps to manage their risk, and make a profit?
Thanks for any help provided