Casualty sidecar

Casualty sidecars, or casualty reinsurance sidecars as they are often termed, are special purpose, typically collateralized financial structures developed to enable an insurance and reinsurance company sponsor to segregate a portfolio of casualty risk and transfer it to, or fund it via, third-party investors.

Casualty sidecar structures are typically launched by an insurance or reinsurance company to share the risks and rewards of underwriting specific casualty (liability) insurance policies with outside investors. Being casualty insurance focused the duration of the risks is typically longer and as a result a casualty sidecar vehicle often features defined commutation and exit points for capital providers.

Given the duration of casualty risks, most casualty sidecar structures also have an asset strategy, allowing the investors to benefit from greater return on collateral in many cases. In fact, some casualty sidecars may deliver higher-returns from the asset side of the vehicle, than from the underwriting returns.

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