Investment Funds And 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 (including losses and expenses) in exchange for a proportional share of the premium. ILS products typically cover natural catastrophes