Derivative Re

The capital and derivatives markets are no strangers to risk. However, there are certain features of insurance risk which are atypical of the risks with which these markets are accustomed to dealing. Perhaps the most fundamental distinguishing feature is that in financial markets, there is no requirement for the risk seller (that is the note issuer or derivative counter party) to have suffered any loss as a condition of the risk buyer making a payment. Nor does the risk seller need any interest in the underlying subject matter as a condition of receiving payment. It is the absence of the insurable interest feature that enables instruments such as credit linked notes to avoid being construed as insurance under English law. Because of this, market participants fall outside the regulatory regime for insurance.

Equally, not all types of insurance risk naturally lend themselves to a capital markets or derivatives solution. Instruments in these markets have, generally, a certain and final maturity or termination date. A further contrasting feature relates to the mechanism used for determining the measure of loss in respect of a risk. The financial markets are accustomed to measuring loss or gain by reference to established and well understood indices. It is a relatively simple matter in the context of interest rates, currencies, equities and commodities. It is less so in the case of a claim in relation to a specific policy of insurance or reinsurance. Notably, though, the increasing volume of credit risk and credit default instruments is enabling investors to become more familiar with case specific loss measure mechanisms.

What We Do

Derivative Re develops, assists, and implements risk management, risk transfer, risk securitazation, and risk strategies for corporations, governments, and organizations to better manage their derivative risk by offering the following: 

• Forwards. In a forward contract, one party agrees to sell to the other a specific quantity of a commodity, foreign currency or financial instrument at a specified price at a given date in the future. Because the contract is not settled until it matures, each party takes on the risk that the other might default.
• Futures. Like forwards, futures contracts call for future delivery of an underlying asset at a stipulated price. Unlike forwards, however, futures are traded on an exchange. The terms of the contract -- for example, the date and location of delivery -- are standardized. Futures contracts are "marked to market" on a daily basis -- that is, the parties record any change in the price of the underlying asset and settle their margin accounts accordingly. This eliminates the credit risk inherent in forwards.
• Swaps. These privately negotiated contracts are similar to forwards in that their characteristics, such as delivery arrangements and credit procedures, are determined by the contracting parties. They differ from forwards in that the parties also agree to settle their accounts on a regular basis -- for example, every couple of months.
• Options. An option is a contract that gives its holder the right, but not the obligation, to buy or sell a specified amount of an underlying asset at a set price, called the strike price.
• Credit Default Obligation transfer
• Box Car offerings
• Trading and Crossing technologies
• Comprehensive Risk Management solution suites

Derivative Re provides Derivative solutions and insurance for:

Collateral Management  Risk Management  Regulatory Reporting  Credit Derivatives  Fixed Income & Repos  Interest Rate Devivatives  FX & Money Markets Equities Solutions  Boxcar Floatations  Independent Valuation Services