Bankruptcy Remoteness

A key legal feature of a Special Purpose Vehicle (SPV).

It means the SPV is legally separate from the sponsor, so if the sponsor goes bankrupt for unrelated reasons, its creditors cannot seize the collateral in the SPV. This secures the money for its intended purpose.

Insurance-linked securities arrangements, including catastrophe bonds, typically use an SPV, or a cell of an SPV structure and bankruptcy remoteness as well as the ring-fencing of collateral are key features of this market.