I believe my main post or the responses might have been unclear. If so, my apologies.
But your understanding isn't correct. Other companies are not insuring your downside. We are the only counter party you have.
The problem is if a recession happens, then a lot of our properties actually decline in value. As a result, we might not be able to pay you back. So to make sure we can pay you back we buy financial instruments on the open market, kind of like buying a stock of apple for example. These instruments work in a very interesting way. Their prices go up, if the real estate market goes down. Their prices go down, if the real estate market goes up.
So, with these instruments. We can ensure that in the event of a recession, we can still afford to pay you back, because we can sell the instruments for higher prices than we originally paid for. We then use that profit to cover the losses our customers experience.
The way this works out is that events that would cause large declines in the property values are covered by these instruments. Which means, as a company, we just need to pay specific attention to the potential losses between 0-20% range. Here, we deposit the 20% value of the original purchase price into the 3rd party account.
In the event that our company stops operation. These hedging instruments don't expire or disappear. They are bought at the beginning of our agreement with our customer. As a result, these instruments will be passed off to our lawyers along with the 3rd party account for them to maintain. This way, your loss coverage will still be guaranteed even if we go out of business.
Is this more clear? If not, I can always elaborate :)