Insurance Linked Securities – Turning Disaster Into Opportunity

Christopher Anderson, a partner at Carey Olsen in Guernsey, takes an in-depth look at ILS.

The recent disastrous floods in the UK were caused by a succession of European windstorms (the latest being Windstorm Ulla). While devastating for those unfortunate enough to be affected by the floods, European windstorms and other natural disasters can provide a unique opportunity for others to invest in the pure insurance risk associated with the chance occurrence of natural catastrophes. Such investments are often structured through a somewhat esoteric investment called an insurance linked security (ILS). These investments involve the convergence of both investment and insurance expertise. For that reason, it is perhaps not surprising that Guernsey has seen an increase in ILS transactions in the last year or so. This article considers why Guernsey is such an attractive jurisdiction for ILS.