A Primer on Insurance-Linked Securities
Author: GesKR 2010, 503 f.; Dike Verlag 
Date: Monday, February 07, 2011
Christoph Buerer, Partner of Twelve Capital, reviews the drivers behind the emergence of insurance-linked securities (ILS) and elaborates on the workings of ILS, placing a special emphasis on the general legal framework within which ILS operate.

The convergence of (re)insurance and capital markets has been a driving force of financial innovation and also set the stage for the creation of insurance-linked securi- ties (ILS)2. While ILS effectively bridge (re)insurance and capital markets in numerous ways, the term ILS has been almost exclusively used to describe techniques ofinsurance securitisation which essentially transform insurance risk into tradable securities.3 However, as a more accurate reflection of the most significant devel- opments in a convergence context, it is proposed that ILS be, more broadly, referred to as a concept center- ing around financial instruments, whose pay-off and value depend on the performance of genuine insurance- related risks.4 This contribution offers a general review of ILS, elaborates on the generic mechanics of ILS and places a special emphasis on exploring the legal frame- work within which ILS operate.


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