...This report provides the global methodology for rating insurance-linked securities either as the obligations or as counterparty credit risk of special-purpose (re)insurers (collectively ILS). Master criteria from Structured Finance, Insurance, or both will be referenced in Fitch Ratings' analysis depending on the circumstances of any particular transaction. ILS refers to various types of transactions whose primary aim is to isolate and transfer specific insurance risks to investors or other third parties. Usually these risks are "low frequency, high severity" events or incorporate remote triggers. Generally speaking, ILS serves as a vehicle for risk transfer, risk financing or securitization of future cash flows. Examples of transferred risk perils include natural catastrophes, pandemics (extreme mortality) and medical loss ratios. Risk financing may cover excess reserve requirements on life insurance contracts (i.e. Regulation XXX reserves). Securitization transactions may include fees...
