Fundamentals of ILS

Welcome to our guide. Before we explore the products and market players, it’s important to understand what Insurance-Linked Securities are, why the market exists, and the significant  investment principle that makes them so unique.

We will begin on Page 1.1: What are Insurance-Linked Securities? by establishing a core definition. Here, you’ll learn how ILS creates a bridge between )re/insurance risk and the global capital markets, effectively allowing investors to act as insurers.

Next, on Page 1.2: The Purpose of ILS we will explore why sponsors, such as insurance companies, come to this market for efficient, fully-collateralized protection and why, simultaneously, institutional investors are drawn to it as well.

Finally, Page 1.3: The Key Benefit: Why Uncorrelated Returns Matter dives into the single most important investment thesis for ILS. Here, we will l explain what non-correlation means in practice; that these assets are driven by physical events, not financial markets; and why this provides a powerful diversification benefit to a traditional investment portfolio.