A guaranteed investment contract (GIC) is a type of investment product that offers a guaranteed return of principal and a fixed interest rate. GICs are typically issued by insurance companies, and they can be used to securitise a variety of assets, such as mortgages, loans, and receivables.
When a GIC is securitised, it is divided into smaller units, called tranches, which are then sold to investors. This allows investors to own a share of the GIC, without having to take on the full risk of the investment.
There are a number of applications for securitisation of GICs. One application is to provide finance for insurance companies. Insurance companies often need to invest large sums of money, and securitisation of GICs can provide them with a way to do this.
Another application of securitisation of GICs is to provide investors with a way to diversify their portfolios. Investors who own shares in a securitised GIC will have a stake in a number of different GICs, which can help to reduce their risk.
Here are some other applications of securitisation of GICs:
- To provide liquidity for the GIC market
- To reduce the risk of default on GICs
- To provide a way for insurance companies to transfer risk
Securitisation of GICs can be a useful tool for both insurance companies and investors. It can provide finance for insurance companies and it can also provide investors with a way to diversify their portfolios.