Special Purpose Vehicle (SPV) or Special Purpose Entity (SPE)

An undertaking, trust or other unit, established for a specific purpose, the activities of which are limited solely to the purpose of the special purpose vehicle, and the structure of which is intended to separate the special purpose vehicle from the risk of default of the originator or seller of positions. Special purpose vehicles are usually used as financing vehicles, in which exposures to are sold to a trust property or a similar entity and are paid for in cash or by transferring of other assets, which are financed by means of debt securities issued by the trust property.

The Insurance Supervision Act defines special purpose vehicles as any undertaking, whether incorporated or not, other than an existing insurance or reinsurance undertaking, which assumes risks from insurance or reinsurance undertakings and which fully funds its exposure to such risks through the proceeds of a debt issuance or any other financing mechanism where the repayment rights of the providers of such debt or financing mechanism are subordinated to the reinsurance obligations of such an undertaking.