|
Annual 2009 ILS Review and Q1 2009 Quarterly Performance
Review
April, 2009
By: Morton N. Lane, President; Roger G. Beckwith, Vice President
“Change we can believe in” was a very successful political campaign for
2008. Let’s hope it is just as successful for the ILS market in 2009.
The “change” necessary for the ILS market involves the security of
funds on deposit at Special Purpose Vehicles. The “belt and suspenders”
protection the market thought it had, prior to the Lehman default, was
found wanting. For four now infamous, ILS securities the belt (the
Total Return Swap, TRS) broke with that default of Lehman but the
suspenders (the collateral behind the swap) were then found to be of
inquality. The old arrangement did not provide security to either
cedants or investors. Pre-Lehman TRS mechanisms need “change” and the
market is now preoccupied with deciding which change to believe in.
|