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ARTICLE · 16 OCTOBER 2012

The Application Of Commodity Pool Rules To Insurance Linked Securities

Hogan Lovells Cadwalader
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Whether cat bond and other ILS transactions will be able to qualify for the insurance safe harbor will depend in part on whether the cedants in the transactions are subject to supervision by any state or by the federal government.

United StatesFinance and Banking
Malcolm Wattman
Malcolm Wattman
Frank Polverino
Frank Polverino
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The Dodd-Frank Act's expansion of the definition of "commodity pool" to include any form of enterprise operated for the purpose of trading in "swaps," coupled with the Commodity Futures Trading Commission ("CFTC") and the Securities and Exchange Commission ("SEC") recently adopting an expansive definition of the term "swap" for purposes of the Dodd-Frank Act and the Commodity Exchange Act, creates uncertainty regarding whether issuers of insurance linked securities ("ILS") are commodity pools that would require the registration of commodity pool operators ("CPO") and commodity trading advisors ("CTA") with the CFTC.

Expansive Definition of Swap

On July 10, 2012, pursuant to a joint release ("Joint Release") the CFTC and the SEC adopted final rules, which became effective on October 12, 2012, broadly defining the term "swap" to include, in addition to those contracts commonly known as swaps (including interest rate swaps, floors and caps, currency swaps and credit

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