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Catastrophe Bonds Structures at European Level – A Cluster Analysis Approach

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  • Loris Lino Maria Nadotti
  • Laura-Gabriela Constantin

Abstract

The present paper aims at examining several characteristics of the catastrophe bonds (CB) market by focusing on emblematic transactions with the objective of stressing the choices of the European-based (re)insurance groups in terms of the CB tranches structure. For the purpose of highlighting the common individualities regarding the configuration of the catastrophe bonds, there are recognized homogenous groups in terms of covered perils and size of the each CB tranche, while emphasizing some stringent aspects linked to their trigger mechanism (like the basis risk), their rating, or tenor. The research identifies several profiles regarding the structural characteristics of the CB during the entire analysed period (1999-2014) and the main periods of development of the market. Accommodating categorical and continuous data, the structural patterns are determined and analysed by applying the two-step cluster methodology.

Suggested Citation

  • Loris Lino Maria Nadotti & Laura-Gabriela Constantin, 2014. "Catastrophe Bonds Structures at European Level – A Cluster Analysis Approach," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 17(54), pages 115-141, December.
    • Handle: RePEc:rej:journl:v:17:y:2014:i:54:p:115-141
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    References listed on IDEAS

    as
    1. Darius Lakdawalla & George Zanjani, 2012. "Catastrophe Bonds, Reinsurance, and the Optimal Collateralization of Risk Transfer," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 79(2), pages 449-476, June.
    2. J. David Cummins & Mary A. Weiss, 2009. "Convergence of Insurance and Financial Markets: Hybrid and Securitized Risk‐Transfer Solutions," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(3), pages 493-545, September.
    3. Marinoiu Ana Maria, 2009. "Operational Risk In International Business: Taxonomy And Assessment Methods," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 195-201, May.
    4. Laura-Gabriela CONSTANTIN, 2014. "Catastrophe Bonds. From Structure to Strategy – A Cluster Analysis at European Level," Economia. Seria Management, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 17(2), pages 304-317, December.
    5. Silke Finken & Christian Laux, 2009. "Catastrophe Bonds and Reinsurance: The Competitive Effect of Information‐Insensitive Triggers," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(3), pages 579-605, September.
    6. Georges Dionne (ed.), 2013. "Handbook of Insurance," Springer Books, Springer, edition 2, number 978-1-4614-0155-1, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    catastrophe bonds structure; alternative risk transfer mechanisms; two-step cluster analysis; (re)insurance European market;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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