Catastrophe loss warranty products

An industry loss warranty (ILW) is a reinsurance or derivative contract that pays out when total industry losses from an event exceed an agreed threshold, often combined with a loss to the buyer itself.

Insurers and specialist carriers have created ILW-style products to help clients manage catastrophe risk with simpler, faster settlement than traditional indemnity covers.

Because payouts depend on industry losses rather than the buyer's own claims, these products carry basis risk. They are usually used alongside traditional reinsurance rather than as a replacement.