Reinsurance Side Car Vehicle (SCV):
Reinsurance sidecar vehicles, conventionally referred to as "Sidecars," are financial structures that are created to allow investors to take on the risk and return of a group of insurance policies (a "book of business") written by an insurer or reinsurer and earn the risk and return that arises from that business. A reinsurer will only pay ("cede") the premiums associated with a book of business to such an entity if the investors place sufficient funds in the vehicle to ensure that it can meet claims if they arise. Typically, the liability of investors is limited to these funds. These structures became quite prominent in the aftermath of Hurricane Katrina as a vehicle for reinsurers to add risk-bearing capacity, and for investors to participate in the potential profits resulting from sharp price increases in reinsurance. Sidecars are typically distinct from collateralized retrocessional reinsurance in that the funds are typically raised in anticipation of sourcing a book of business for specific purposes of the sidecar rather than covering a defined set of pre-existing exposures as is more typical of collateralized retrocessional reinsurance.