Insurance Transformers And Other Structured Insurance Products In Jersey

Introduction

Over the last decade there has been a noted convergence of the capital markets and the insurance/reinsurance markets and the evolution of a variety of structured insurance products.

One type of such insurance products are commonly referred to as 'insurance transformers' or 'transformers'. An insurance transformer is an entity (usually an Special Purpose Vehicle ("SPV")) which 'transforms' one type of financial risk into another. Typically this will be risk under an insurance or reinsurance contract transformed into risk under a credit derivative agreement, or vice versa.

In practice, the use of transformer SPVs may involve a range of different scenarios, which include: