What is a Sidecar?
A special purpose reinsurance vehicle that provides capacity to a specific reinsurer, sharing proportionally in premiums and losses.
Sidecar
A special purpose reinsurance vehicle that provides capacity to a specific reinsurer, sharing proportionally in premiums and losses.
How it works in practice
Before hurricane season, a global reinsurer creates a sidecar vehicle and invites pension funds and sovereign wealth funds to invest. The sidecar writes a quota share of the reinsurer's Florida wind book for one year. If the season passes without major losses, investors receive a share of the underwriting profit. If a large hurricane strikes, investors absorb losses proportional to their participation.
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