Insurance-Linked Securities: Solutions for a Resilient Future

Have you ever thought about additional (multiyear) capacity via Cat Bond? Are you aware of what Munich Re can deliver in the ILS space? Why should a reinsurer be involved in your Cat Bond transaction? 

• Insurance-Linked Securities (ILS) are financial instruments that allow investors to participate in the risk and return of insurance-related assets. ILS products, such as catastrophe bonds (“Cat Bonds”), enable re/insurance companies, state pools and corporates (“sponsors” or “cedants”) to transfer risk to the capital markets, providing an additional layer of financial protection and stability. By harnessing the power of ILS, sponsors can better manage their risk profiles, increase their capacity, and improve their financial resilience.

Munich Re's ILS team offers a range of solutions, including:

• Catastrophe bonds: A type of financial instrument allowing investors to take on catastrophe risk in exchange for regular premium payments (risk spread). If a catastrophe occurs, the investor's principal is used to pay claims, reducing the financial burden for the cedant.
• Sidecars: Collateralized reinsurance vehicles allowing investors to participate in the risk and returns of a specific book of business via a quota share agreement. Sidecars are typically used to provide additional capacity for peak risks, such as natural catastrophes.
• Industry loss warranties (ILWs): A type of reinsurance contract that triggers a payout based on the total losses incurred by the insurance industry as a whole (e.g. trigger based on PCS or PERILS), rather than the specific losses of the individual sponsor. ILWs provide a way to manage exposure to extreme events.

Munich Re clients will benefit from our experience of >60 structured and fronted transactions with a volume of more than 20bn USD transferred to the capital market.

Our comprehensive support across the entire ILS value chain ensures that clients receive tailored solutions and expert guidance every step of the way