What are insurance-linked securities (or ILS)?

Insurance-linked securities, or ILS, are essentially financial instruments which are sold to investors whose value is affected by an insured loss event. As such the term insurance-linked security encompasses catastrophe bonds and other forms of risk-linked securitization.

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Insurance-linked securities are generally thought to have little to no correlation with the wider financial markets as their value is linked to non-financial risks such as natural disasters, longevity risk or life insurance mortality.

As securities, insurance-linked securities can be and are traded among investors and on the secondary-market. They allow insurers to offload risk and raise capital, they also allow life insurers to release the value in their policies by packaging them up and issuing them as asset-backed notes.

Read our What is a catastrophe bond? article to gain a better understanding of that area of the insurance-linked securities market.

Read about recent and historic catastrophe bond transactions.

Keep up with the latest insurance-linked securities news on our blog.

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