Insurance Linked Securities & Industry Loss Warranty Structures

In recent times, there has been an increased demand from the capital and insurance markets to create structures that allow investors to provide insurance capacity, without the need to establish an insurance company. These structures need to be flexible, as investors want the freedom to enter and withdraw from the market quickly and without high costs.

Historically, a Special Purpose Vehicle (SPV) has been the chosen mechanism for transforming capital into risk. However, this has its drawbacks as each stand alone SPV requires considerable time and cost to set up and license. An alternative is to use a cell or segregated account in an established protected cell or segregated account company. Owners of the PCC or SAC have already done the hard work by incorporating the company and licensing it, which negates the need for individual company set up and speeds the time to market.

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