Catastrophe bond
Encyclopedia
Investor
An investor is a party that makes an investment into one or more categories of assets --- equity, debt securities, real estate, currency, commodity, derivatives such as put and call options, etc...
s. They were created and first used in the mid-1990s in the aftermath of Hurricane Andrew
Hurricane Andrew
Hurricane Andrew was the third Category 5 hurricane to make landfall in the United States, after the Labor Day Hurricane of 1935 and Hurricane Camille in 1969. Andrew was the first named storm and only major hurricane of the otherwise inactive 1992 Atlantic hurricane season...
and the Northridge earthquake
Northridge earthquake
The Northridge earthquake was a massive earthquake that occurred on January 17, 1994, at 04:31 Pacific Standard Time in Reseda, a neighborhood in the city of Los Angeles, California, lasting for about 10–20 seconds...
.
Catastrophe bonds emerged from a need by insurance companies to alleviate some of the risk they would face if a major catastrophe occurred, which would incur damages that they could not cover by the premium
Premium
Premium may refer to:* Premium , a promotional item that can be received for a small fee when redeeming proofs of purchase that come with or on retail products....
s, and returns from investments using the premiums, that they received. An insurance company issues bond
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
s through an investment bank, which are then sold to investors. These bonds are inherently risky, generally BB, and are multi-year deals. If no catastrophe occurred, the insurance company would pay a coupon
Coupon (bond)
A coupon payment on a bond is a periodic interest payment that the bondholder receives during the time between when the bond is issued and when it matures. Coupons are normally described in terms of the coupon rate, which is calculated by adding the total amount of coupons paid per year and...
to the investors, who made a healthy return. On the contrary, if a catastrophe did occur, then the principal would be forgiven and the insurance company would use this money to pay their claim-holders. Investors include hedge fund
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
s, catastrophe-oriented funds, and asset managers. They are often structured as floating rate bonds
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
whose principal is lost if specified trigger conditions are met. If triggered the principal is paid to the sponsor. The triggers are linked to major natural catastrophes. Catastrophe bonds are typically used by insurers as an alternative to traditional catastrophe reinsurance
Reinsurance
Reinsurance is insurance that is purchased by an insurance company from another insurance company as a means of risk management...
.
For example, if an insurer has built up a portfolio of risks by insuring properties in Florida, then it might wish to pass some of this risk on so that it can remain solvent after a large hurricane. It could simply purchase traditional catastrophe reinsurance, which would pass the risk on to reinsurers. Or it could sponsor a cat bond, which would pass the risk on to investors. In consultation with an investment bank, it would create a special purpose entity that would issue the cat bond. Investors would buy the bond, which might pay them a coupon
Coupon (bond)
A coupon payment on a bond is a periodic interest payment that the bondholder receives during the time between when the bond is issued and when it matures. Coupons are normally described in terms of the coupon rate, which is calculated by adding the total amount of coupons paid per year and...
of LIBOR plus a spread, generally (but not always) between 3 and 20%. If no hurricane hit Florida, then the investors would make a healthy return on their investment. But if a hurricane were to hit Florida and trigger the cat bond, then the principal initially paid by the investors would be forgiven, and instead used by the sponsor to pay its claims to policyholders.
Michael Moriarty
Michael Moriarty (government official)
Michael Moriarty is the Deputy Superintendent for Property and Capital Markets in the New York State Insurance Department.-New York State Insurance Department:...
, Deputy Superintendent of the New York State Insurance Department
New York State Insurance Department
The New York State Insurance Department is the State regulating agency responsible for supervising and regulating all insurance business in New York State. It is regarded in the industry as one of the most state-of-the-art insurance regulating agencies. The Superintendent is James J...
, has been at the forefront of state regulatory efforts to have U.S. regulators encourage the development of insurance securitization
Securitization
Securitization is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or credit card debt obligations and selling said consolidated debt as bonds, pass-through securities, or Collateralized mortgage obligation , to...
s through cat bonds in the United States instead of off-shore, through encouraging two different methods—protected cells and special purpose reinsurance vehicles. In August 2007 Michael Lewis
Michael Lewis (author)
Michael Lewis is an American non-fiction author and financial journalist. His bestselling books include The Big Short: Inside the Doomsday Machine, Liar's Poker, The New New Thing, Moneyball: The Art of Winning an Unfair Game, The Blind Side: Evolution of a Game, Panic and Home Game: An...
, the author of Liar's Poker
Liar's Poker
Liar's Poker is a non-fiction, semi-autobiographical book by Michael Lewis describing the author's experiences as a bond salesman on Wall Street during the late 1980s...
and Moneyball, wrote an article about catastrophe bonds that appeared in The New York Times Magazine
The New York Times Magazine
The New York Times Magazine is a Sunday magazine supplement included with the Sunday edition of The New York Times. It is host to feature articles longer than those typically in the newspaper and has attracted many notable contributors...
, entitled "In Nature's Casino."
History
The notion of securitizing catastrophe risks became prominent in the aftermath of Hurricane AndrewHurricane Andrew
Hurricane Andrew was the third Category 5 hurricane to make landfall in the United States, after the Labor Day Hurricane of 1935 and Hurricane Camille in 1969. Andrew was the first named storm and only major hurricane of the otherwise inactive 1992 Atlantic hurricane season...
, notably in work published by Richard Sandor, Ken Froot, and a group of professors at the Wharton School who were seeking vehicles to bring more risk-bearing capacity to the catastrophe reinsurance market. The first experimental transactions were completed in the mid-1990s by AIG
American International Group
American International Group, Inc. or AIG is an American multinational insurance corporation. Its corporate headquarters is located in the American International Building in New York City. The British headquarters office is on Fenchurch Street in London, continental Europe operations are based in...
, Hannover Re
Hannover Re
Hannover Re , with a gross premium of around €11 billion, is one of the leading reinsurance groups in the world...
, St. Paul Re, and USAA
USAA
United Services Automobile Association is a Fortune 500 financial services company offering banking, investing, and insurance to people and families that serve, or served, in the United States military. In 2011, there were 8.4 million members. The company reported a net worth of $19.3 billion in...
.
The market grew to $1–2 billion of issuance per year for the 1998–2001 period, and over $2 billion per year following 9-11. Issuance doubled again to a run rate of approximately $4 billion on an annual basis in 2006 following Hurricane Katrina, and was accompanied by the development of Reinsurance Sidecar
Reinsurance Sidecar
Reinsurance sidecars, conventionally referred to as "Sidecars," are financial structures that are created to allow investors to take on the risk and return of a group of insurance policies written by an insurer or reinsurer and earn the risk and return that arises from that business...
s. Issuance continued to increase through 2007, despite the passing of the post-Katrina "hard market," as a number of insurers sought diversification of coverage through the market, including State Farm
State farm
State farm can refer to:*Sovkhoz, a type of state-owned farm in the Soviet Union*Volkseigenes Gut, a type of state-owned farm in East Germany*Państwowe Gospodarstwo Rolne, a type of state-owned farm in People's Republic of Poland...
, Allstate
Allstate
The Allstate Corporation is the second-largest personal lines insurer in the United States and the largest that is publicly held. The company also has personal lines insurance operations in Canada. Allstate was founded in 1931 as part of Sears, Roebuck and Co., and was spun off in 1993...
, Liberty Mutual
Liberty Mutual
Liberty Mutual Group, more commonly known by the name of its primary line of business Liberty Mutual, is a diversified global insurer and the third largest property and casualty insurer in the United States based on 2010 net written premium. It is the 82nd company on the Fortune 500 list for 2011...
, Chubb
Chubb Corp.
Chubb Corporation is the eleventh largest property and casualty insurer in the United States, with over 120 offices located in 29 countries, and offers commercial, specialty, surety, and personal insurance services...
, and Travelers, along with long-time issuer USAA. Total issuance exceeded $4 billion in the second quarter of 2007 alone.
It should be possible to adapt these instruments to other contexts. Professor Lawrence A. Cunningham
Lawrence A. Cunningham
Lawrence A. Cunningham is an American author of corporate governance and investing books and is Henry St. George Tucker III Research Professor of Law at George Washington University.-Life:...
of George Washington University suggests adapting cat bonds to the risks that large auditing firms face in cases asserting massive securities law damages. Other innovative uses of cat bond structures have been proposed as well.
Investors
Investors choose to invest in catastrophe bonds because their return is largely uncorrelated with the return on other investments in fixed incomeFixed income
Fixed income refers to any type of investment that is not equity, which obligates the borrower/issuer to make payments on a fixed schedule, even if the number of the payments may be variable....
or in equities, so cat bonds help investors achieve diversification. Investors also buy these securities because they generally pay higher interest rates (in terms of spreads over funding rates) than comparably rated corporate instruments, as long as they are not triggered.
Key categories of investors who participate in this market include hedge fund
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
s, specialized catastrophe-oriented funds, and asset managers. Life insurers, reinsurers, banks, pension fund
Pension fund
A pension fund is any plan, fund, or scheme which provides retirement income.Pension funds are important shareholders of listed and private companies. They are especially important to the stock market where large institutional investors dominate. The largest 300 pension funds collectively hold...
s, and other investors have also participated in offerings. The financial changes beginning in 2007 accelerated what had been a gradual shift away from the fund of funds community toward more direct investment.
A number of specialized catastrophe-oriented funds play a significant role in the sector, including Credit Suisse
Credit Suisse
The Credit Suisse Group AG is a Swiss multinational financial services company headquartered in Zurich, with more than 250 branches in Switzerland and operations in more than 50 countries.-History:...
, Goldman Sachs Asset Management
Goldman Sachs
The Goldman Sachs Group, Inc. is an American multinational bulge bracket investment banking and securities firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients...
, Juniperus Capital
Juniperus Capital
Juniperus Capital Limited is a Bermuda-based hedge fund. It was incorporated in Bermuda on April 11, 2008. The investment management company became operational in May 2008....
, AXA Investment Managers
AXA
AXA S.A. is a French global insurance group headquartered in the 8th arrondissement of Paris. AXA is a conglomerate of independently run businesses, operated according to the laws and regulations of many different countries. The AXA group of companies engage in life, health and other forms of...
, Fermat Capital Management, Nephila Capital, and Clariden Leu
Clariden Leu
Clariden Leu is a Swiss private bank based in Zurich, Switzerland. Following the merger of the four Credit Suisse private banks: Clariden Bank, Bank Leu, Bank Hofmann, and BGP Banca di Gestione Patrimoniale together with the securities dealer Credit Suisse Fides on January 26, 2007, Clariden Leu is...
and Twelve Capital. Several mutual fund managers also invest in catastrophe bonds, among them Oppenheimer Funds
Oppenheimer
Oppenheimer as a surname may refer to:* Alan Oppenheimer , film actor* Andrés Oppenheimer , Argentine author and journalist known for his analysis of Latin American politics...
, Pioneer Investments
Pioneer Investments
Pioneer Investments is an investment company based in Boston, MA specializing in mutual funds. In 1928, Philip L. Carret founded the Pioneer Fund , now the third oldest mutual fund in the United States. The Pioneer Fund is often cited as the first mutual fund based on ethical values...
, and PIMCO.
Ratings
Cat bonds are often rated by an agency such as Standard & Poor'sStandard & Poor's
Standard & Poor's is a United States-based financial services company. It is a division of The McGraw-Hill Companies that publishes financial research and analysis on stocks and bonds. It is well known for its stock-market indices, the US-based S&P 500, the Australian S&P/ASX 200, the Canadian...
, Moody's
Moody's
Moody's Corporation is the holding company for Moody's Analytics and Moody's Investors Service, a credit rating agency which performs international financial research and analysis on commercial and government entities. The company also ranks the credit-worthiness of borrowers using a standardized...
, or Fitch Ratings
Fitch Ratings
The Fitch Group is a majority-owned subsidiary of FIMALAC, headquartered in Paris. Fitch Ratings, Fitch Solutions and Algorithmics, are part of the Fitch Group....
. A typical corporate bond is rated based on its probability of default due to the issuer going into bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
. A catastrophe bond is rated based on its probability of default due to a qualifying catastrophe triggering loss of principal. This probability is determined with the use of catastrophe models. Most catastrophe bonds are rated below investment grade (BB and B category ratings), and the various rating agencies have recently moved toward a view that securities must require multiple events before occurrence of a loss in order to be rated investment grade.
Structure
Most catastrophe bonds are issued by special purpose reinsurance companies domicilied in the Cayman IslandsCayman Islands
The Cayman Islands is a British Overseas Territory and overseas territory of the European Union located in the western Caribbean Sea. The territory comprises the three islands of Grand Cayman, Cayman Brac, and Little Cayman, located south of Cuba and northwest of Jamaica...
, Bermuda
Bermuda
Bermuda is a British overseas territory in the North Atlantic Ocean. Located off the east coast of the United States, its nearest landmass is Cape Hatteras, North Carolina, about to the west-northwest. It is about south of Halifax, Nova Scotia, Canada, and northeast of Miami, Florida...
, or Ireland. These companies typically write one or more reinsurance policies to protect buyers (most commonly, insurers or reinsurers) called "cedants." This contract may be structured as a derivative
Derivative
In calculus, a branch of mathematics, the derivative is a measure of how a function changes as its input changes. Loosely speaking, a derivative can be thought of as how much one quantity is changing in response to changes in some other quantity; for example, the derivative of the position of a...
in cases in which it is "triggered" by one or more indice
Index (economics)
In economics and finance, an index is a statistical measure of changes in a representative group of individual data points. These data may be derived from any number of sources, including company performance, prices, productivity, and employment. Economic indices track economic health from...
s or event parameters (see below), rather than losses of the cedant.
Some bonds cover the risk that multiple losses will occur. The first second event bond (Atlas Re) was issued in 1999. The first third event bond (Atlas II) was issued in 2001. Subsequently, bonds triggered by fourth through ninth losses have been issued, including Avalon
Avalon
Avalon is a legendary island featured in the Arthurian legend. It first appears in Geoffrey of Monmouth's 1136 pseudohistorical account Historia Regum Britanniae as the place where King Arthur's sword Excalibur was forged and later where Arthur was...
, Bay Haven, and Fremantle, each of which apply tranching technology to baskets of underlying events. The first actively managed pool of bonds and other contracts ("Catastrophe CDO
Collateralized debt obligation
Collateralized debt obligations are a type of structured asset-backed security with multiple "tranches" that are issued by special purpose entities and collateralized by debt obligations including bonds and loans. Each tranche offers a varying degree of risk and return so as to meet investor demand...
") called Gamut was issued in 2007, with Nephila as the asset manager.
Trigger types
The sponsor and investment bank who structure the cat bond must choose how the principal impairment is triggered. Cat bonds can be categorized into four basic trigger types. The trigger types listed first are more correlated to the actual losses of the insurer sponsoring the cat bond. The trigger types listed farther down the list are not as highly correlated to the insurer's actual losses, so the cat bond has to be structured carefully and properly calibrated, but investors would not have to worry about the insurer's claims adjustment practices.Indemnity: triggered by the issuer's actual losses, so the sponsor is indemnified, as if they had purchased traditional catastrophe reinsurance. If the layer specified in the cat bond is $100 million excess of $500 million, and the total claims add up to more than $500 million, then the bond is triggered.
Modeled loss: instead of dealing with the company's actual claims, an exposure portfolio is constructed for use with catastrophe modeling software, and then when there is a large event, the event parameters are run against the exposure database in the cat model. If the modeled losses are above a specified threshold, the bond is triggered.
Indexed to industry loss: instead of adding up the insurer's claims, the cat bond is triggered when the insurance industry loss from a certain peril reaches a specified threshold, say $30 billion. The cat bond will specify who determines the industry loss; typically it is a recognized agency like PCS. "Modified index" linked securities customize the index to a company's own book of business by weighting the index results for various territories and lines of business.
Parametric: instead of being based on any claims (the insurer's actual claims, the modeled claims, or the industry's claims), the trigger is indexed to the natural hazard caused by nature. So the parameter would be the windspeed (for a hurricane bond), the ground acceleration
Peak ground acceleration
Peak ground acceleration is a measure of earthquake acceleration on the ground and an important input parameter for earthquake engineering, also known as the design basis earthquake ground motion...
(for an earthquake bond), or whatever is appropriate for the peril. Data for this parameter is collected at multiple reporting stations and then entered into specified formulae. For example, if a typhoon generates windspeeds greater than X meters per second at 50 of the 150 weather observation stations of the Japanese Meteorological Agency, the cat bond is triggered.
Parametric Index: Many firms are uncomfortable with pure parametric bonds due to the lack of correlation with actual loss. For instance, a bond may pay out based on the wind speed at 50 of the 150 stations mentioned above, but the insurer loses very little money because a majority of their exposure is concentrated in other locations. Models can give an approximation of loss as a function of the speed at differing locations, which are then used to give a payout function for the bond. These function as hybrid Parametric / Modeled loss bonds, and have lowered basis risk as well as more transparency.
Market participants
Examples of cat bond sponsors include insurers, reinsurers, corporations, and government agencies. Over time, frequent issuers have included USAAUSAA
United Services Automobile Association is a Fortune 500 financial services company offering banking, investing, and insurance to people and families that serve, or served, in the United States military. In 2011, there were 8.4 million members. The company reported a net worth of $19.3 billion in...
, Swiss Re
Swiss Re
Swiss Reinsurance Company Ltd , generally known as Swiss Re, is a Swiss reinsurance company. It is the world’s second-largest reinsurer, after having acquired GE Insurance Solutions. The company has its headquarters in Zurich...
, Munich Re
Munich Re
Munich Re Group is a reinsurance company based in Munich, Germany. It is one of the world’s leading reinsurers. ERGO, a Munich Re subsidiary, is the Group’s primary insurance arm....
, Liberty Mutual
Liberty Mutual
Liberty Mutual Group, more commonly known by the name of its primary line of business Liberty Mutual, is a diversified global insurer and the third largest property and casualty insurer in the United States based on 2010 net written premium. It is the 82nd company on the Fortune 500 list for 2011...
, Hannover Re
Hannover Re
Hannover Re , with a gross premium of around €11 billion, is one of the leading reinsurance groups in the world...
, Allianz
Allianz
SE is a global financial services company headquartered in Munich, Germany. Its core business and focus is insurance. As of 2010, it was the world's 12th-largest financial services group and 23rd-largest company according to a composite measure by Forbes magazine.Its Allianz Global Investors...
, and Tokio Marine Nichido. Mexico is the only national sovereign to have issued cat bonds (in 2006, for hedging earthquake risk and in 2009, a multistructure instrument that covered earthquake and hurricane risk).
To date, all direct catastrophe bond investors have been institutional investor
Institutional investor
Institutional investors are organizations which pool large sums of money and invest those sums in securities, real property and other investment assets...
s, since all broadly distributed transactions have been distributed in that form. These have included specialized catastrophe bond fund
Bond fund
A bond fund is a collective investment scheme that invests in bonds and other debt securities. Bond funds typically pay periodic dividends that include interest payments on the fund's underlying securities plus periodic realized capital appreciation. Bond funds typically pay higher dividends than...
s, hedge fund
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
s, investment advisor
Investment Advisor
The term Investment Advisor is an individual or firm who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities...
s (money managers), life insurers, reinsurers, pension fund
Pension fund
A pension fund is any plan, fund, or scheme which provides retirement income.Pension funds are important shareholders of listed and private companies. They are especially important to the stock market where large institutional investors dominate. The largest 300 pension funds collectively hold...
s, and others. Individual investors have generally purchased such securities through specialized funds.
Investment banks and other dealers that are active in the issuance of catastrophe bonds include Aon Benfield Securities, Inc., Swiss Re Capital Markets, Munich Re
Munich Re
Munich Re Group is a reinsurance company based in Munich, Germany. It is one of the world’s leading reinsurers. ERGO, a Munich Re subsidiary, is the Group’s primary insurance arm....
Capital Markets, Barclays Capital
Barclays Capital
Barclays Capital is a global British investment bank. It is the investment banking division of Barclays plc which has a balance sheet of over £1.2 trillion . Barclays Capital provides financing and risk management services to large companies, institutions and government clients. It is a primary...
, Deutsche Bank
Deutsche Bank
Deutsche Bank AG is a global financial service company with its headquarters in Frankfurt, Germany. It employs more than 100,000 people in over 70 countries, and has a large presence in Europe, the Americas, Asia Pacific and the emerging markets...
, BNP Paribas
BNP Paribas
BNP Paribas S.A. is a global banking group, headquartered in Paris, with its second global headquarters in London. In October 2010 BNP Paribas was ranked by Bloomberg and Forbes as the largest bank and largest company in the world by assets with over $3.1 trillion. It was formed through the merger...
, Goldman Sachs
Goldman Sachs
The Goldman Sachs Group, Inc. is an American multinational bulge bracket investment banking and securities firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients...
, Merrill Lynch
Merrill Lynch
Merrill Lynch is the wealth management division of Bank of America. With over 15,000 financial advisors and $2.2 trillion in client assets it is the world's largest brokerage. Formerly known as Merrill Lynch & Co., Inc., prior to 2009 the firm was publicly owned and traded on the New York...
, JP Morgan, and Willis
Willis
-People:*Bailey Willis, American geological engineer who worked for the United States Geological Survey *Bruce Willis, American actor; played David Addison in Moonlighting and John McClane in the Die Hard films*Chris Willis, American singer...
Capital Markets. Some of these groups also make secondary market
Secondary market
The page applies to the finanical term; For the merchandising concept, see Aftermarket .The secondary market, also called aftermarket, is the financial market where previously issued securities and financial instruments such as stock, bonds, options, and futures are bought and sold....
s in these bonds.
Experts in the field include Dr. Morton N. Lane of Lane Financial LLC http://www.lanefinancialllc.com, Professor Lawrence A. Cunningham
Lawrence A. Cunningham
Lawrence A. Cunningham is an American author of corporate governance and investing books and is Henry St. George Tucker III Research Professor of Law at George Washington University.-Life:...
of George Washington University
George Washington University
The George Washington University is a private, coeducational comprehensive university located in Washington, D.C. in the United States...
and Professor Ken Froot of Harvard University
Harvard University
Harvard University is a private Ivy League university located in Cambridge, Massachusetts, United States, established in 1636 by the Massachusetts legislature. Harvard is the oldest institution of higher learning in the United States and the first corporation chartered in the country...
.
Patents
There are a number of issued US patents and pending US patent applicationPatent application
A patent application is a request pending at a patent office for the grant of a patent for the invention described and claimed by that application. An application consists of a description of the invention , together with official forms and correspondence relating to the application...
s related to catastrophe bonds.
See also
- Catastrophe modelingCatastrophe modelingCatastrophe modeling is the process of using computer-assisted calculations to estimate the losses that could be sustained due to a catastrophic event such as a hurricane or earthquake...
- International Society of Catastrophe ManagersInternational Society of Catastrophe ManagersThe International Society of Catastrophe Managers is a professional association that promotes catastrophe management professionalism within the insurance industry.-Goal and objectives:...
- Fixed incomeFixed incomeFixed income refers to any type of investment that is not equity, which obligates the borrower/issuer to make payments on a fixed schedule, even if the number of the payments may be variable....
- ReinsuranceReinsuranceReinsurance is insurance that is purchased by an insurance company from another insurance company as a means of risk management...
- Risk managementRisk managementRisk management is the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities...
- Reinsurance SidecarReinsurance SidecarReinsurance sidecars, conventionally referred to as "Sidecars," are financial structures that are created to allow investors to take on the risk and return of a group of insurance policies written by an insurer or reinsurer and earn the risk and return that arises from that business...
- Captive insuranceCaptive insuranceCaptive insurance companies are insurance companies established with the specific objective of financing risks emanating from their parent group or groups, but they sometimes also insure risks of the group's customers as well...
- Alternative Risk TransferAlternative Risk TransferAlternative Risk Transfer is the use of techniques other than traditional insurance and reinsurance to provide risk bearing entities with coverage or protection...
External links
- Artemis Catastrophe Bond Deal Directory – list of all major cat bond deals
- Catastrophe Bond News
- 2nd ILS Europe Summit, London, April 2010
- 7th Insurance-Linked Securities Summit, New York, January 2010
- General information website on insurance securitizations (by Okubo)
- Article "Applications of Insurance Securitization" (UChicago Business School), 10/23/00
- Presentation by Diego Rangel
- Mad scramble for capital fuels cat bond market, 7/16/06
- "In Nature's Casino" (by Michael Lewis), New York Times Magazine, 8/26/07
- Insurers Push the Cat Bond Envelope
- Cat Bond Pricing Using Probability Transforms (by Shaun S. Wang)
- Securitization – new opportunities for insurers and investors (by Swiss Re)
- Financial Innovations in Insurance – Panel Discussion in New York, January 2008
- Discussion of Cat Bonds and Synthetic Cat Risk Transfer on Quantnet
- Article on cat bond market, risk models and activity post-Katrina: Into the tempest, Risk Magazine (2006) Navroz Patel
- Article on cat derivatives, ILWs and cat CDOs: For whom cat risk tolls, Risk Magazine (2007) Navroz Patel
- Article on rising cat bond and CDO issuance: At a turning point, Risk Magazine (2007) Navroz Patel
- Report on regulatory and market changes needed to effectively manage catastrophic risk through cat bonds and other market innovations. Milken Institute, May 2008
- The US Reinsurance Under 40s Group
- International Society of Catastrophe Managers
- GC Capital Ideas, Catastrophe Bond Articles
- Reinsurance Guru – reinsurance news and analysis Web-site
- Lane Financial LLC - Analysis and Commentary on the Catastrophe Bond market