Rameez Says

This article provides a brief introduction to insurance-linked securities (ILS) as an asset class in order to lay the foundation for the more thorough treatment of individual types of ILS in the rest of the blog. It explains the reasons for transferring insurance risks to the capital markets and the benefits this transfer provides both to the insurance industry and to the investors. The types of insurance risk transferred to the capital markets are also briefly discussed. INSURANCE-LINKED SECURITIES DEFINED In the article Investing in insurance risk, we defined insurance-linked securities as financial instruments , other than traditional equity and debt securities issued by insurance companies, that carry insurance risk or a type of risk that is closely related to it. Examples of the risks included in ILS are those associated with property catastrophe, mortality, longevity and insurance loss reserve adequacy. ILS can also include many of the traditional risks such as market, credit and

This article provides a brief overview of concepts that are fairly obvious to most professionals in the investment and insurance field but may be unfamiliar to other readers. In addition, insurance risk is presented through an uncommon perspective that sheds light on its unique characteristics and corresponding investment considerations. Investing in Risk There are no truly riskless assets. We always invest in risk. We might do it in the form of stocks, corporate bonds, real estate or treasuries, but ultimately the investment performance of these securities is predicated on their risks. We invest because we expect to earn a return commensurate with the risk we take in investing. In fact, we want the return to be higher than what the risk profile of an investment would imply. Insurance Risk is good It is too simplistic to say that �risk is bad�, and to think that it is something we want to avoid or minimise. Investing is always about risk. In fact, investors actively search for risk to