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PROPERTY INDUSTRY LOSS WARRANTIES (ILWS)Since Hurricane Katrina in 2005, the ILW market has developed at pace because these deals attract sellers from a variety of sources—including major insurance and reinsurance companies, hedge funds and investment banks.ILW coverage is limited to only those perils listed in the contract, normally wind and earthquake. As a result, coverage is clear cut meaning that buyers and sellers are not at risk from unforeseen perils through vague wordings. ILWs also pay out quickly once the trigger is breached, with digital pay outs widely available. One other appeal of the ILW product is that the loss modelling process is not typically reliant upon the buyer’s information, meaning that this can remain confidential to the client. The last two years have also seen the contract documentation process become easier and more standardized. To read articles on Industry Loss Warranties or go to the News Room
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A recent study provided some explanation as to why ILWs are gaining ground compared to traditional reinsurance:
“The ILW product matches both sellers’ appetites and buyers’ needs, and has fewer constraints on attracting and renewing its capital base. You buy only what you need and collect what you pay for.”
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