|April 29, 2014|
Previously published on April 24, 2014
“There are very good reasons why insurance-linked securities (ILS) are seen as a positive alternative to catastrophe reinsurance by regulators and others concerned about the solvency of insurers and reinsurers,” writes Clive O’Connell, a partner in Goldberg Segalla’s Global Insurance Services Practice Group.
“Solvency risk, however, is not the only risk of non-performance that exists. There is not only the risk a counterparty cannot pay but the risk it will not pay: litigation risk.”
In this article, Clive examines how the nature of ILS — including the lack of a long-term relationship, differing restraints on the investor, and the bespoke nature of contract wordings — can increase the risk of a dispute after a major loss. He provides practical tips for reducing, and hopefully eliminating, litigation risk through paying careful attention to the contract wordings of ILS products.