Cash flow advantages for Protection Buyers
Capital economy for Protection Sellers

 Cash flow advantages for Protection Buyers

• Protection Buyers pay no premium as such but instead deposit Maintenance Margin, which outside of the hurricane season is 2% of the contract limit/notional value, and as low as 6% during the hurricane season.
  
  
• As the IFEX daily price changes, money will immediately flow into or out of the Protection Buyers margin account. If the daily price rises the Protection Seller will pay Variation Margin to the Protection Buyer (and vice versa if the daily price falls).
  
  
• When the relevant Loss Trigger Level is exceeded (i.e. a claim),  the Protection Buyer receives the residual  difference between the contract value/notional limit and the initial contract price less any Variation Margin already received from the Protection Seller. In effect, the Protection Buyer has been paid the claim net of premium.

Capital economy for Protection Sellers

• Protection Sellers do not need to put up capital to meet the full amount of their potential financial obligations in the event of a loss triggering event. Instead, they deposit Maintenance Margin, which outside the hurricane season is 8% of the contract limit/notional value, and as low as 24% during the hurricane season reflecting the actual threat.