Risk transformation reinsurance companies facilitate a bridge between capital markets and reinsurance markets. These vehicles have tremendous flexibility to sell or buy protection in a wide range of different forms. With this flexibility the transformer can transact using (re)insurance contracts and in turn fully hedge the risk assumed through International Swaps and Derivatives Association ("ISDA") derivative contracts in capital markets (or vice versa). Transformers can also play an integral part in securitisation structures, converting illiquid risks into Insurance Linked Securities ("ILS").
A risk transformation insurance company is not a provider of capacity, rather a facilitator for transactional business. As no net risk is retained, careful structuring lies at the heart of all successful risk transformations and securitisations to ensure that no underwriting, basis or credit risk remains in the structure. Added protection also comes from using segregated accounts or protected cells which legally segregate the assets of one cell from the creditors of any and all other cells. Combined with careful structuring, the cell concept effectively ring-fences transactions from each other, and from the core capital of the company.
in Bermuda and Guernsey. In Bermuda we have significant an unparalleled record working alongside leading investment banks providing management services to their risk transformation vehicles. We currently manage several segregated account ("protected cell") reinsurance transformer companies either owned or sponsored by investment banks. Combined these companies operate 46 protected cells containing over USD 8 Billion in notional transformation trades and securitisations.
Our service includes assisting with business planning, financial projections and working with your legal counsel to navigate the incorporation and regulatory approval processes. Once the transformer vehicle is operational, we can assist in structuring transactions and establishing new segregated cells as well as managing cash flows and financial reporting obligations. We can also provide insight into issues that may arise from a regulatory point of view and accounting/audit considerations.