Kate Storey of Appleby's corporate and commercial
team in Guernsey looks at the emerging alternative asset class of
insurance linked securities.
Insurance linked securities (ILS) are growing as an alternative
asset class for a diverse group of capital markets investors,
including investment funds. Further, the sponsors of ILS products
are showing increasing interest in Guernsey as the jurisdiction in
which to establish their ILS structure (where Bermuda has
traditionally dominated).
ILS products typically include catastrophe bonds (Cat bonds),
industry loss warranties (ILWs) and sidecars. Cat bonds are
risk-linked securities that transfer catastrophe risks to capital
market investors. ILWs enable a purchaser to buy protection based
on insurance industry losses arising from a specific event, rather
than from the buyer's losses. Sidecars are special
limited purpose (re)insurance companies which assume a portion of
the ceding (re)insurer's underwriting risks
