Cat bond ‘lite’ structures raise contamination risk and insolvency fears

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Experts are divided on the use of segregated accounts companies (SAC) in so-called catastrophe bond ‘lite' transactions, with some suggesting they introduce an increased element of risk compared with more traditional structures.

In a typical cat bond issue, catastrophe risk is transferred from the cedant to the capital markets via a fully collateralised special purpose vehicle (SPV) completely separated from the operations of the ceding (re)insurer. The process is standardised under Rule 144a of