Disintermediation occurs in high or low interest rate environments? Can someone please explain the concept in plain words?

High interest rate. Policyholder surrender their policy for cash to reinvest in a higher rate => Shorten the liab DUR => Increase the sponsor liquidity need

It’s withdrawal of funds from (L.I.) policy actually, so includes full surrender and policy loans. Motivation for investor: - IR arbitrage. Re-investment for a higher rate elsewhere. Implication for institution: - Shotened Liability duration means instant liquidity requirement, which could mean sales of bonds at a realised loss to cover the withdrawal. - An asset/liability duration mismatch would exaccerbate the above.