How do interest rate changes affect the profitability of the banking sector?

A: The banking sector’s profitability increases with interest rate hikes. Institutions in the banking sector such as retail banks, commercial banks, investment banks, insurance companies and brokerages have massive cash holdings due to customer balances and business activities. Increases in the interest rate directly increase the yield on this cash, and the proceeds go directly … Read more

Industry Loss Warranty

What is ‘Industry Loss Warranty’ An industry loss warranty is an insurance or reinsurance contract in which coverage is triggered when the losses experienced by an industry exceed a specific threshold. Industry loss warranties (ILW) are most commonly written by reinsurance companies or hedge funds, since these organizations are able to absorb more losses than … Read more

Water Damage Clause

What is ‘Water Damage Clause’ A water damage clause is a clause in a property-casualty insurance contract. A water damage clause states that the insured is covered for water damage that occurs for specific reasons, such as frozen pipes or sewer backup. Water damage clauses are therefore usually included in most homeowners and renters’ policies. … Read more