In context of reinsurance, a sidecar is an insurance investment vehicle created by the reinsurance company. By investing in sidecar, investors can participate in the risk and return of a specific group of insurance policies and the liability of investors is limited to the funds of the sidecar. This structure became popular after Hurricane Katrina as a vehicle for reinsurers/insurers to add risk-bearing capacity and for investors to participate in the potential profits from a sharp increase in reinsurance premium.

Investing Essentials

Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Tactical Asset Allocation (TAA)

Portfolio strategy that allows active departures from the normal asset mix according to specified objective measures of value. Often called active management. It involves forecasting asset returns... Read More

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