Reinsurance Sidecar

See: Reinsurance.

If you and a bunch of officemates at your insurance company are planning on starting a blues cover band, we highly recommend the name "Reinsurance Sidecar." We guarantee your convention business will be rockin' (but don't come a-knockin').

Some events are hard to insure. For life insurance, there are lots of statistics that let companies price policies effectively. Ditto for car accidents and health insurance. However, some things are both unpredictable and really destructive, like hurricanes or Godzilla attacks. It's hard for insurance companies to plan for these, so they need to develop more creative structures to handle the risks involved.

Enter the reinsurance sidecar. This is a special reinsurance company set up for a particular reason, such as to protect against hurricanes. Reinsurance sidecars have a limited time frame (often less than two years), and are privately funded. They also have defined risks.

Basically, these setups are pools of money set aside in case a particular awful something happens. They aren't operating companies; they don't have salespeople or phone reps or a staff of their own. They are corporate structures set up for a particular purpose, providing a backstop for situations that insurance firms have a hard time predicting.