Double Gearing

AAA

DEFINITION of 'Double Gearing'

Used to describe situations where multiple companies are using shared capital to buffer against risk occurring in separate entities without the proper documentation of exposure.

INVESTOPEDIA EXPLAINS 'Double Gearing'

Most common in financial sectors, one frequent example is insurance companies purchasing shares in banks as a reciprocal arrangement for loans. In these cases, both institutions are leveraging their exposure to risk.

RELATED TERMS
  1. Gearing

    The level of a company’s debt related to its equity capital, ...
  2. Double Dipping

    For brokerage firms, when a broker puts commissioned products ...
  3. Leverage

    1. The use of various financial instruments or borrowed capital, ...
  4. Bank

    A financial institution licensed as a receiver of deposits. There ...
  5. Double Barreled

    A municipal general obligation bond in which the cash flows are ...
  6. Coastal Barrier Improvement (CBI) ...

    A federal law that makes federal disaster relief and federal ...
RELATED FAQS
  1. What do insurance companies qualify as hazardous activity?

    An insurance company defines a hazardous activity essentially as any type of undertaking with a high level of risk of injury ... Read Full Answer >>
  2. What financial ratios are most useful for an investor to evaluate the liquidity of ...

    An insurance company, like any other nonfinancial company, needs access to liquidity in case it needs to fulfill its debt ... Read Full Answer >>
  3. What economic indicators are important to monitor when investing in the insurance ...

    Inflation and interest rates are the best economic indicators to monitor when investing in the insurance sector. Unlike with ... Read Full Answer >>
  4. Why do some companies in the insurance sector engage in reinsurance?

    Some companies in the insurance sector engage in reinsurance because they want to reduce risk. Reinsurance is basically insurance ... Read Full Answer >>
  5. Why is the insurance sector considered a low-risk investment?

    Historically, the insurance sector has enjoyed modest returns and perceived safety. It's been a favorite for investors who ... Read Full Answer >>
  6. What price-to-book ratio is considered average in the chemicals sector?

    You can use Microsoft Excel to calculate the loan-to-value ratio if you have the mortgage amount and appraised value of a ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Stock Basics Tutorial

    If you're new to the stock market and want the basics, this is the tutorial for you!
  2. Options & Futures

    Options Basics Tutorial

    Discover the world of options, from primary concepts to how options work and why you might use them.
  3. Options & Futures

    Financial Concepts

    Diversification? Optimal portfolio theory? Read this tutorial and these and other financial concepts will be made clear.
  4. Options & Futures

    Investing 101: A Tutorial For Beginner Investors

    Do want to invest, but don't know how to begin? We'll show you the building blocks you need to get started.
  5. Insurance

    Do You Need Kidnap & Ransom Insurance?

    Americans working abroad – and high-profile individuals traveling frequently in kidnapping hot spots – should consider this type of protection.
  6. Insurance

    A Guide To Kidnap & Ransom Insurance

    Every year, thousands of people are kidnapped for ransom all over the world. This insurance offers protection – and peace of mind.
  7. Insurance

    Should I Insure My Wedding Ring?

    It depends, in part, on the ring's value and your current insurance coverage. Here's a guide to making a decision that's right for you.
  8. Insurance

    How To Insure Your Wedding Ring

    Read on for everything you need to know to make sure this precious possession is covered against theft, damage, loss and more.
  9. Professionals

    How Advisors Can Help When a Service Member Dies

    Finances are probably last thing that survivors of our nation’s deceased service members want to deal with. Here's what advisors can do to help.
  10. Investing Basics

    Are Annuities Right for You?

    Annuities are safe and often appealing, but IRAs and 401(k)s offer advantages that annuities typically can’t match, with little additional risk.

You May Also Like

Hot Definitions
  1. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  2. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  3. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  4. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
  5. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating ...
  6. Risk-Return Tradeoff

    The principle that potential return rises with an increase in risk. Low levels of uncertainty (low-risk) are associated with ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!