Sunday, April 11, 2010

Insurance linked

Insurance linked securities represent just another form of risk-anchored securities. Insurance linked securities, whether in the form of catastrophe bonds or synthetic life settlements, offer investors both a high potential for growth and a diversified and uncorrelated asset. Following a landmark year in 2007, the catastrophe bond market has faced challenges in 2008. Insurance Linked Securities continue their success story and enjoy attention as an uncorrelated and interesting asset class whose performance has been within expectations over the past year.



Demand in 2010 will come from both sides of the balance sheet: developments in collateral structures and increasing standardisation and index access is opening the asset class to more investors, while insurance companies, driven by Solvency II and balance sheet efficiency, and following the crisis in the banking market in the last few years, are increasingly using the capital markets (for funding and capital) rather than the traditional use of the re-insurance and banking markets, and are identifying more liabilities eligible for securitisation.



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