Industry Loss Warranties

Industry Loss Warranties (ILWs) are financial agreements between insurers and reinsurers that provide a form of risk sharing for large industry-wide insurance losses, often related to catastrophic events like natural disasters. When a certain threshold of loss for the whole industry is reached within a specified period, the ILW pays out to help cover those losses, reducing financial strain on insurers. Essentially, they act as a safety net, offering protection based on aggregate industry losses rather than individual policies, helping stabilize the insurance market during large-scale events.