It is doubtful that the Island's CAT capacity will develop as a cohesive market like Lloyds, where following markets rely on the underwriting of leading markets and do less analysis themselves. Much like the commercial treaty reinsurers in Bermuda in the 70's and 80's, each company will underwrite each submission on its own merits and will only support risks which are adequately rated. The term Financial Reinsurance is difficult to define. There is no unique term or feature to be found in a financial reinsurance contract which would set it apart from more traditional insurance agreements. It is rather a combination of features which taken as a whole lead to the conclusion that a financial reinsurance agreement exists.
Contracts are usually multi-year in duration.
The security of confirmed capacity at a determinable price throughout the duration of the contract permits the forward planning of pricing and targeted business volume. If results are good, significant underwriting profit is returned. A salient feature of most Financial Reinsurance contracts is broad form coverage. The level of exclusions is invariably much lower than those found in more traditional contracts. As financial reinsurers are usually protected by contract maximums, they are generally more willing to assume coverage for problem risks which traditional reinsurers would seek to avoid.