Using Catastrophe-Linked Securities to Diversify Insurance Risk: a Financial Analysis of Cat Bonds
AbstractSevere natural catastrophes in the early nineties have brought about a lack of financial capacity in the catastrophe line of the global reinsurance market. The finance industry reacted to this situation by issuing innovative products designed to spread the excess risk more widely among international investors (risk securitization). The paper reviews these developments and stresses their significance with respect to the economic theory of risk exchanges. Special attention is devoted to the case of catastrophe-linked bonds, issued at a premium by ceding insurers to secure ex post conditional capital for the payment of claims.
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Bibliographic InfoPaper provided by Département des Sciences Économiques, Université de Genève in its series Research Papers by the Department of Economics, University of Geneva with number 99.04.
Length: 28 pages
Date of creation: 1999
Date of revision:
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INVESTMENTS ; INSURANCE ; RISK;
Other versions of this item:
- Henri Louberge & Evis Kellezi & Manfred Gilli, 1999. "Using Catastrophe-Linked Securities to Diversity Insurance Risk: A Financial Analysis of Cat Bonds," Journal of Insurance Issues, Western Risk and Insurance Association, vol. 22(2), pages 125-146.
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
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