SIDECARS

Rough Notes, Mar 2007 by Moody, Michael J

Sidecars can provide additional capacity, which is sorely needed in today's property market. The capital markets have been trying for years to beat down the door to enter the insurance arena. It is now painfully obvious that there will never be sufficient capacity within the insurance industry to survive the "big one." And even a catastrophe that approached the losses possible from a "big one" could so cripple the industry, it would endanger its continued existence. Given that situation, prudent insurers and reinsurers should be exploring some of the innovative capital market ideas such as sidecar arrangements, so as to add capacity to the industry as quickly as possible.

By Michael J. Moody, MBA, ARM