Insurance-linked securities (ILS) related fee income and profit shares can become a “significant contributor” to the earnings of insurance and reinsurance firms that manage third-party capital, according to rating agency Moody’s.

While the vast majority of reinsurers already leverage alternative capital and insurance-linked securities (ILS) within their retrocession arrangements, some have gone further to integrate third-party investors into their businesses.

Moody’s explained, “A number of reinsurers have also built sizable third-party capital platforms to manage alternative reinsurance capital investments for institutional investors through sidecar joint ventures and insurance-linked securities (ILS) funds management, creating a stream of relatively stable management fee income and profit-sharing arrangements.”

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