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

Investors and lawyers voice concerns about using segregated accounts structure to issue streamlined cat bond instruments


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

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