Abstract

http://ssrn.com/abstract=2036127
 
 

References (31)



 
 

Citations (10)



 
 

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Cat Bonds and Other Risk‐Linked Securities: State of the Market and Recent Developments


J. David Cummins


Temple University; Temple University - Risk Management & Insurance & Actuarial Science; University of Pennsylvania - Insurance & Risk Management Department

Spring 2008

Risk Management and Insurance Review, Vol. 11, Issue 1, pp. 23-47, 2008

Abstract:     
This article reviews the current status of the market for catastrophic risk (CAT) bonds and other risk‐linked securities. CAT bonds and other risk‐linked securities are innovative financial vehicles that have an important role to play in financing mega‐catastrophes and other types of losses. The vehicles are especially important because they access capital markets directly, exponentially expanding risk‐bearing capacity beyond the limited capital held by insurers and reinsurers. The CAT bond market has been growing steadily, with record amounts of risk capital raised in 2005, 2006, and 2007. CAT bond premia relative to expected losses covered by the bonds have declined by more than one‐third since 2001. CAT bonds now appear to be priced competitively with conventional catastrophe reinsurance and comparably rated corporate bonds. CAT bonds have grown to the extent that they now play a major role in completing the market for catastrophic‐risk finance and are spreading to other lines such as automobile insurance, life insurance, and annuities. CAT bonds are not expected to replace reinsurance but to complement the reinsurance market by providing additional risk‐bearing capacity. Other innovative financing mechanisms such as risk swaps, industry loss warranties, and sidecars also are expected to continue to play an important role in financing catastrophic risk.

Number of Pages in PDF File: 25

Accepted Paper Series


Date posted: April 9, 2012  

Suggested Citation

Cummins, J. David, Cat Bonds and Other Risk‐Linked Securities: State of the Market and Recent Developments (Spring 2008). Risk Management and Insurance Review, Vol. 11, Issue 1, pp. 23-47, 2008. Available at SSRN: http://ssrn.com/abstract=2036127 or http://dx.doi.org/10.1111/j.1540-6296.2008.00127.x

Contact Information

John David Cummins (Contact Author)
Temple University ( email ) ( email )
Fox School of Business and Management
1301 Cecil B. Moore Ave.
Philadelphia, PA 19122
United States

Temple University - Risk Management & Insurance & Actuarial Science ( email ) ( email )
Fox School of Business and Management
1301 Cecil B. Moore Ave.
Philadelphia, PA 19122
United States

University of Pennsylvania - Insurance & Risk Management Department ( email )
Philadelphia, PA 19104-6365
United States
215-898-5644 (Phone)
215-898-0310 (Fax)

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References:  31
Citations:  10
Footnotes:  8

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