Insurance‑linked securities (ILS) are financial instruments whose value is driven by insurance risks rather than traditional market risks, providing an alternative source of risk capital to the (re)insurance sector. Structures like cat bonds, collateralised reinsurance, and sidecars allow investors to access catastrophe and specialty risks with low correlation to equities and bonds. For insurers, ILS offer additional capacity, retrocession options, and capital relief, but demand rigorous modelling, transparent structuring, and alignment of interests between cedants and investors.
