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Cigna plays 'good bank/bad bank' with insureds.

Cigna Corp's use of a 'good bank/bad bank' strategy to separate performing from nonperforming assets is advantageous in that it funds previously unreserved asbestos and environmental liabilities and raises awareness of the company's active operations. However, the arrangement's reinsurance contingency and excess-of-loss treaty makes it likely the inactive pool will eventually draw on the active one.

Cigna's restructuring of its property-casualty operations, announced on Oct. 2, incorporates elements of a method known as the "good bank/bad bank strategy," which commercial bank managements and regulators have used often in the past to separate poorly performing assets from healthy ones.

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