The International Association of Insurance Supervisors (IAIS) has released its first midyear edition of the Global Reinsurance Market Report, entitled ‘Developments in (Re)Insurance Securitisation’. The report supplements the year-end report by providing a qualitative analysis of the main characteristics, functions and developments in the insurance securitisation market.
The insurance securitisation market, although relatively small, has proven to provide an effective mechanism to complement traditional reinsurance. Insurance securitisation arrangements encompass a wide variety of alternative risk transfer mechanisms by which insurance risks are transferred to the capital markets.
Jeremy Cox, chair of the IAIS Reinsurance Transparency Group, noted that “while insurance and banking securitisation share some key features, there are important differences between them, which are important for supervisors to be mindful of, especially during the current financial market situation. For example, in an insurance securitisation, the sponsor remains fully liable to the policyholder for the insurance risk transferred to the special purpose vehicle.”
The report highlights the unique nature of insurance securitisation by:
- Describing the main features of insurance securitisation structures and how they operate in practice.
- Providing data on emerging trends and their relation to financial stability.
- Highlighting international developments in the regulation and supervision of insurance securitisation.
- Summarising key learning from recent developments.
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