Insurance-linked securities (ILS) are an asset class based upon insurance events. They provide an element of diversity to portfolios. Put simply, a market collapse is unlikely to be correlated to a natural disaster.
- Insurance-linked securities can be an attractive investment as they are uncorrelated with other assets
- Recent hurricanes in the US have increased the focus on ILS
- In some jurisdictions, insurance-based solutions are dependent on insurance penetration
- There is no reason why ILS cannot protect governments as well as companies and individuals