Insurance Linked Securities: the basics

more+
less-

Insurance-linked securities (“ILS”) are innovative financial vehicles that are increasingly used to finance peak, non-recurrent insurance risks, such as hurricanes, pandemics and earthquakes, and other types of losses. ILS are significant because they are offered directly to capital markets, reducing cyclicality and expanding risk bearing capacity in the reinsurance market. The distinguishing characteristic of ILS is the ability to isolate pure insurance risk from credit risk and other types of market risk and transform this risk into a capital markets form. Consequently, ILS are one of the few truly non-correlated assets that investors can purchase. In addition, the yield on ILS has historically been higher than similarly rated securities and liquidity in secondary markets is improving. ILS volume has grown substantially in the last three years and ILS now present a competitive substitute for reinsurance in many non-life markets.

This article broadly explains ILS: the most common forms; the reasons why (re)insurers and investors are attracted to ILS; shortcomings of ILS; how ILS are legally structured; and, how each element of the structure works together.

LOADING PDF: If there are any problems, click here to download the file.

Written by:

Published In:

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Shane de Burca, de Burca PLLC | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

CONNECT

Shane de Burca
de Burca PLLC

We are a boutique law firm based in New York City, offering outstanding legal services in focused... View Profile »


Follow de Burca PLLC:

Reporters on Deadline

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.
×
Loading...
×
×