ILS (Insurance-Linked Securities)

Insurance-Linked Securities (ILS) are financial instruments that allow investors to bet on the occurrence of specific insurance events, such as natural disasters. Essentially, insurers can sell these securities to raise funds for potential claims. If a disaster occurs, investors may lose some or all of their investment; if not, they earn returns comparable to traditional investments. ILS provide insurers with capital during catastrophic events while offering investors opportunities for high yields, albeit with higher risks. They play a vital role in the global reinsurance market, helping to distribute risk more broadly.