These days, one would be hard-pressed to find an area of the capital markets that has not been influenced by CDO practices, in one way or another. Now the reinsurance and capital markets industry has SelectCat, a product developed to guide the reinsurance and capital markets in hedging and pricing risk on certain managed portfolios they mean to protect.
Launched last week, SelectCat aims to give capital market providers interested in insurance risks more data transparency and better risk exposure control, plus sustaining access to potential customers for sellers. The hybrid product is similar to a CDO, because it incorporates a basket of underlying contracts. Unlike a pure index, SelectCat incorporates a synthetic tranche within the basket, and does not gear off of the basket's exact results, David Priebe, head of Guy Carpenter & Co.'s specialty operations.