ILS Products: From Public Catastrophe Bonds to Private Deals

Now that you understand why ILS exists, this section will explore what insurance-linked securities is.

An important part to remember is that the ILS market is not defined by a specific product, but by a diverse toolbox of instruments, each designed for a specific purpose. This section provides a summary  of that toolbox, starting with an Overview of the ILS Product Landscape (Page 2.1).

We will then divide the market into its two main components. Firstly, in Sub-Section 2.2: Catastrophe Bonds, we explore the most visible and tradable part of the market.

Then, because the trigger is the most critical component of any ILS product, we’ve dedicated individual pages that explain what each type is: Indemnity (2.2.3), Parametric (2.2.4), Industry Loss Index (2.2.5), and Modeled Loss (2.2.6).

Secondly, Sub-Section 2.3: Private ILS (The Non-Bond Market) explores the larger and less visible side of the industry. This is where most ILS managers effectively deploy capital.

Here, you will learn  what Collateralized Reinsurance is (2.3.1) which remains one of the ILS market’s core products, as well as Industry Loss Warranties (ILWs) (2.3.2) and Reinsurance Sidecars (2.3.3).

We’ll conclude with a direct comparison of these private deals versus public catastrophe bonds.