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ILS
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- Due to fundamental changes in the insurance industry (Solvency II) insurance companies are increasingly transferring risks to capital markets by means of insurance-linked securities (ILS)
- The underlying insurance risks vary from large natural and man-made catastrophes to motor and life insurance
- Insurance companies benefit from the securitization of insurance risks as counterparty risk to reinsurance companies can be avoided, return on equity be increased and earnings volatility be reduced
- To investors, the inclusion of ILS has a favorable effect on the risk/return profile of a portfolio due to positive expected returns and little correlation with equities, bonds and alternative investments
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