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Perez Fructuoso, María José - One of the best experts on this subject based on the ideXlab platform.

  • Cálculo de un índice de pérdidas por catástrofes desencadenante de los Insurance-Linked Securities, ILS. Revisión de los modelos precedentes y propuesta de un modelo continuo alternativo
    'Editorial Pontificia Universidad Javeriana', 2020
    Co-Authors: Perez Fructuoso, María José
    Abstract:

    Este artículo propone un modelo continuo para determinar el índice de pérdidas aseguradas desencadenante de los Insurance-Linked Securities, ILS. Para ello, se considera que la cuantía total de la catástrofe cubierta en la emisión, está formada por la suma de dos variables aleatorias, la cuantía declarada de siniestros y la cuantía de siniestros pendiente de declarar. La hipótesis central del modelo se basa en suponer un decrecimiento temporal de esta última cuantía, proporcional a una función exponencial, que denominamos tasa de declaración de siniestros asintótica. La dinámica de este decrecimiento la representamos a través de un movimiento browniano geométrico y la cuantía declarada de siniestros, numerador de la ratio de pérdidas que se quiere determinar, se obtiene por diferencia entre la cuantía de siniestros pendiente de declarary la cuantía total de la catástrofe.This article proposes a continuous model to determine the loss-index-trigger of Insurance-Linked Securities (ILS). To this aim, we consider that the total amount of the thus covered catastrophe results from the sum of two random variables, the reported claims amount and the reported-but-not-yet-reported claims amount. The central hypothesisof our model assumes a temporary decrease of the latter, proportional to an exponential function that we call asymptotic reporting claims rate. We represent the dynamics of this decrease through a geometric Brownian motion, wheras the reported claims amount, numerator of the loss ratio intended to be determined, is obtained by the difference between the incurred-but-not-yet-reported claims amount and the catastrophe’s total amount

  • Evolución del mercado de titulización del seguro no vida: de los bonos sobre catástrofes a la titulización de la cartera de automóviles de AXA
    Pontificia Universidad Javeriana, 2020
    Co-Authors: Perez Fructuoso, María José
    Abstract:

    In recent years, a new generation of capital market-based alternative risk transfer and hedged risk financing derivatives has been developed and refined in the branch of nonlife insurance. Known as securitization, the ultimate goal of these products has been to increase the insurance market underwriting capacity, by offering a better coverage through the development and issuance of insurance-based financial derivatives (Insurance-Linked Securities, ILS), such as bonds. The most widespread and refined form of securitization to date is the issuance of catastrophe bonds (or Cat bonds), whose cashflows, coupons and principal are dependent upon the occurrence of a catastrophic event of those specified by the issuance. In 2005, AXA made a significant breakthrough by using these transactions to cover high frequency, low intensity events typically hedged with insurance and reinsurance tradicional mechanisms, such as the automobile portfolio underwriting risk. This article first examines the evolution and development of the cat bond market from its origins until as late as 2007, the last year with available data. Then, the main features of two securitization transactions carried out by AXA to hedge against the highest layers of its automobile portfolio underwriting risk are described. Finally, the paper points out the advantages in using this kind of instruments to the securitization of mass risk.En los últimos años se han desarrollado (y perfeccionado) una serie de instrumentos alternativos de transferencia y financiación de riesgos asegurados en el ramo de seguros no vida basados en los mercados de capital. Conocidos con el nombre de titulización, el objetivo último de estos productos ha sido incrementar la capacidad de suscripción en el mercado asegurador, ofertando mayores coberturas mediante la creación y emisión de derivados financieros basados en seguros (Insurance-Linked Securities, ILS), como bonos.La forma de titulización más desarrollada y utilizada hasta la fecha es la emisión de bonos sobre catástrofes (o Cat bonds), cuyos flujos, cupones y principal, se condicionan a la ocurrencia de un determinado suceso de naturaleza catastrófica establecido en la emisión. En el año 2005, AXA realiza un importante avance dentro de los procesos de titulización del riesgo asegurado al utilizar estas operaciones para cubrir riesgos de elevada frecuencia y baja intensidad típicamente cubiertos a través de los mecanismos aseguradores y reaseguradores tradicionales, como es el riesgo derivado de la siniestralidad de su cartera de automóviles.Este artículo analiza, en primer lugar, la evolución y desarrollo del mercado debonos catastróficos desde sus orígenes y hasta 2007, último año con datos disponibles. Seguidamente, describe y examina las dos transacciones de titulización realizadas por AXA para cubrir el riesgo de una siniestralidad elevada en su cartera de automóviles y estudia las ventajas de utilizar este tipo de operaciones en la titulización del riesgo de masa

Borovka David - One of the best experts on this subject based on the ideXlab platform.

  • Insurance Linked Securities and their Utilisation in Portfolio Construction
    Vysoká škola ekonomická v Praze, 2020
    Co-Authors: Borovka David
    Abstract:

    Bakalářská práce se zabývá kategorií aktiv známých jako Insurance linked Securities se zaměřením na katastrofické dluhopisy. První část věnovaná základním konstrukčním prvkům těchto instrumentů je následována východisky a teoretickými principy tvorby portfolia obsahující vzorce ke kvantifikaci jeho charakteristik. Ve stěžejní části práce je následně vytvořena množina portfolií s katastrofickými dluhopisy, akciemi a dluhopisy a proces je dále replikován při zahrnutí zlata a nemovitostního fondu jako alternativních diverzifikačních aktiv portfolia místo katastrofických dluhopisů. Výsledky a následná analýza potvrzuje výhodnost katastrofických dluhopisů jako složky investičního portfolia ve srovnání se zmíněnými diverzifikačními alternativami.The main theme of this bachelor thesis is an asset class known as Insurance linked Securities with particular focus on catastrophe bonds. Its first part is devoted to essential elements of these instruments and followed by the foundations and principles of modern portfolio theory including formulas used to quantify portfolio’s characteristics. In the pivotal part of the thesis, a portfolio set consisting of catastrophe bonds, stocks and bonds is constructed and the process is replicated by replacing catastrophe bonds by alternative diversifying asset classes, namely gold and real-estate investment fund. The results along with further analysis confirm superior characteristics of portfolios consisting of catastrophe bonds to the other two diversifying alternatives

Vanni Alessio - One of the best experts on this subject based on the ideXlab platform.

  • "Insurance-Linked Securities: i Catastrophe Bonds nell'ambito della Diversificazione di Portafoglio"
    'Pisa University Press', 2020
    Co-Authors: Vanni Alessio
    Abstract:

    Il crescente numero di catastrofi naturali (ed artificiali) e i relativi rischi associati, indubbiamente anche a causa dei recenti cambiamenti climatici che si stanno verificando in tutto il mondo, hanno, inevitabilmente, aumentato la frequenza e la gravità delle perdite finanziarie connesse. Queste perdite finanziarie sono di interesse diretto per il settore assicurativo in quanto, spesso e volentieri, le compagnie di assicurazione sono responsabili della copertura finanziaria per i danni derivanti da questi fenomeni catastrofali. Le potenziali perdite finanziarie che il settore assicurativo si troverebbe ad affrontare, in caso di catastrofi di grandi dimensioni, potrebbero superare la capacità finanziaria propria dei vari assicuratori. In genere, le compagnie assicurative pongono in essere operazioni di riassicurazione al fine di ripartire il rischio ed essere in grado di assorbire perdite maggiori, tuttavia, poiché le catastrofi naturali, indotte dai cambiamenti climatici, e quelle artificiali, quindi causate dall’uomo, continuano a minacciare la stabilità finanziaria del settore assicurativo, si sono sviluppate sempre di più forme alternative di copertura riassicurativa che si presentano sul mercato assicurativo e finanziario ormai dalla metà degli anni ’90. Infatti, questi nuovi titoli assicurativi, che rientrano nella macro categoria delle Insurance Linked Securities (ILS), sono essenzialmente strumenti finanziari venduti agli investitori il cui valore è influenzato da un evento di perdita assicurata; la principale forma di ILS è rappresentata dai Catastrophe Bonds, le c.d. obbligazioni catastrofali, che traggono origine dalla cartolarizzazione del rischio derivante dall’assicurazione di eventi catastrofali e che permettono di trasferire tale rischio alla massa degli investitori attraverso una loro collocazione sul mercato dei capitali. Così facendo, la compagnia di (ri)assicurazione che si avvale di tali strumenti, in alternativa alla tradizionale riassicurazione, oltre ad avere la possibilità di trasferire la totalità, o parte, del rischio assicurato, ha la facoltà di finanziarsi direttamente sul mercato dei capitali qualora sia colpita economicamente dal verificarsi dell’evento negativo. Oltre alla funzione riassicurativa propria di un Cat Bond quale strumento finanziario nato proprio con la suddetta finalità di trasferire un rischio tipicamente assicurativo al mercato finanziario, tali asset si caratterizzano per il fatto che essi abbiano, con gli altri strumenti tipici di negoziazione, una correlazione minima, se non nulla, dovuta alla natura non finanziaria del rischio che sottendono: infatti, questi titoli assicurativi costituiscono, per gli investitori, un’opportunità di investimento alternativa ai classici strumenti finanziari, attraverso cui ottenere una diversificazione di portafoglio più efficiente. I titoli legati al rischio assicurativo, come ad esempio i rischi catastrofali, contribuiscono alla riduzione della rischiosità di un portafoglio di investimento per un determinato livello di rendimento atteso o, viceversa, all’incremento dell’expected return a fronte di un dato livello di volatilità. Tali strumenti possono dirsi relativamente “nuovi”, anche se ormai hanno una storia più che decennale in mercati di alcuni paesi che da tempo hanno avvertito l'esigenza del trasferimento di rischi al mercato finanziario ed hanno approfondito la modalità di intervento tramite Cat Bonds. Pertanto, si rende necessaria l’implementazione di una soluzione innovativa che consenta alle compagnie di assicurazione di attuare una migliore gestione dei rischi nei loro portafogli, caratterizzata dalla cessione degli strati più alti degli stessi a terzi soggetti che abbiano maggiori capacità di capitale o una struttura di diversificazione più efficiente

Erik Banks - One of the best experts on this subject based on the ideXlab platform.

  • alternative risk transfer integrated risk management through insurance reinsurance and the capital markets
    2004
    Co-Authors: Erik Banks
    Abstract:

    Acknowledgements.Biography.PART I: RISK AND THE ART MARKET.1 Overview of Risk Management.1.1 Risk and return.1.2 Active risk management.1.2.1 Risk management processes.1.2.2 Risk management techniques.1.2.3 General risk management considerations.1.3 Risk concepts.1.3.1 Expected value and variance.1.3.2 Risk aversion.1.3.3 Risk transfer and the insurance mechanism.1.3.4 Diversification and risk pooling.1.3.5 Hedging.1.3.6 Moral hazard, adverse selection and basis risk.1.3.7 Non-insurance transfers.1.4 Outline of the book.2 Risk Management Drivers: Theoretical Motivations, Benefits, and Costs.2.1 Maximizing enterprise value.2.2 The decision framework.2.2.1 Replacement and abandonment.2.2.2 Costs and benefits of loss control.2.2.3 Costs and benefits of loss financing.2.2.4 Costs and benefits of risk reduction.2.3 Coping with market cycles.2.3.1 Insurance pricing.2.3.2 Hard versus soft markets.2.4 Accessing new risk capacity.2.5 Diversifying the credit risk of intermediaries.2.6 Managing enterprise risks intelligently.2.7 Reducing taxes.2.8 Overcoming regulatory barriers.2.9 Capitalizing on deregulation.3 The ART Market and its Participants.3.1 A definition of ART.3.2 Origins and background of ART.3.3 Market participants.3.3.1 Insurers and reinsurers.3.3.2 Investment, commercial, and universal banks.3.3.3 Corporate end-users.3.3.4 Investors/capital providers.3.3.5 Insurance agents and brokers.3.4 Product and market convergence.PART II: INSURANCE AND REINSURANCE.4 Primary Insurance/Reinsurance Contracts.4.1 Insurance concepts.4.2 Insurance and loss financing.4.3 Primary insurance contracts.4.3.1 Maximum risk transfer contracts.4.3.2 Minimal risk transfer contracts.4.3.3 Layered insurance coverage.4.4 Reinsurance and retrocession contracts.4.4.1 Facultative and treaty reinsurance.4.4.2 Quota share, surplus share, excess of loss, and reinsurance pools.4.4.3 Finite reinsurance.5 Captives.5.1 Using captives to retain risks.5.1.1 Background and function.5.1.2 Benefits and costs.5.2 Forms of captives.5.2.1 Pure captives.5.2.2 Sister captives.5.2.3 Group captives.5.2.4 Rent-a-captives and protected cell companies.5.2.5 Risk retention groups.5.3 Tax consequences.6 Multi-risk Products.6.1 Multiple peril products.6.2 Multiple trigger products.PART III: CAPITAL MARKETS.7 Capital Markets Issues and Securitization.7.1 Overview of securitization.7.2 Insurance-Linked Securities.7.2.1 Overview.7.2.2 Costs and benefits.7.3 Structural features.7.3.1 Issuing vehicles.7.3.2 Triggers.7.3.3 Tranches.7.4 Catastrophe bonds.7.4.1 Hurricane.7.4.2 Earthquake.7.4.3 Windstorm.7.4.4 Multiple cat peril ILS and peril by tranche ILS.7.4.5 Bond/derivative variations.7.5 Other Insurance-Linked Securities.8 Contingent Capital Structures.8.1 Creating post-loss financing products.8.2 Contingent debt.8.2.1 Committed capital facilities.8.2.2 Contingent surplus notes.8.2.3 Contingency loans.8.2.4 Financial guarantees.8.3 Contingent equity.8.3.1 Loss equity puts.8.3.2 Put protected equity.9 Insurance Derivatives.9.1 Derivatives and ART.9.2 General characteristics of derivatives.9.3 Exchange-traded insurance derivatives.9.3.1 Exchange-traded catastrophe derivatives.9.3.2 Exchange-traded temperature derivatives.9.4 OTC insurance derivatives.9.4.1 Catastrophe reinsurance swaps.9.4.2 Pure catastrophe swaps.9.4.3 Temperature derivatives.9.4.4 Other weather derivatives.9.4.5 Credit derivatives.9.5 Bermuda transformers and capital markets subsidiaries.PART IV: ART OF THE FUTURE.10 Enterprise Risk Management.10.1 Combining risks.10.1.1 The enterprise risk management concept.10.1.2 Costs and benefits.10.2 Developing an enterprise risk management program.10.2.1 Strategic and governance considerations.10.2.2 Program blueprint.10.2.3 Program costs.10.3 End-user demand.11 Prospects for Growth.11.1 Drivers of growth.11.2 Barriers to growth.11.3 Market segments.11.3.1 Finite structures.11.3.2 Captives.11.3.3 Multi-risk products.11.3.4 Capital markets issues.11.3.5 Contingent capital.11.3.6 Insurance derivatives.11.3.7 Enterprise risk management.11.4 End-user profiles.11.5 Future convergence.Glossary.Selected References.Index.

Luis F Zuluaga - One of the best experts on this subject based on the ideXlab platform.

  • computing bounds on the expected payoff of alternative risk transfer products
    Insurance Mathematics & Economics, 2012
    Co-Authors: Andres M Villegas, Andres L Medaglia, Luis F Zuluaga
    Abstract:

    The demand for integrated risk management solutions and the need for new sources of capital have led to the development of innovative risk management products that mix the characteristics of traditional insurance and financial products. Such products, usually referred as Alternative Risk Transfer (ART) products include: (re)insurance contracts that bundle several risks under a single policy; multi-trigger products where the payment of benefits depends upon the occurrence of several events; and insurance linked Securities that place insurance risks in the capital market. Pricing of these complex products usually requires tailor-made complex valuation methods that combine derivative pricing and actuarial science techniques for each product, as well as strong distributional assumptions on the ART’s underlying risk factors. We present here an alternative methodology to compute bounds on the price of ART products when there is limited information on the distribution of the underlying risk factors. In particular, we develop a general optimization-based method that computes upper and lower price bounds for different ART products using market data and possibly expert information about the underlying risk factors. These bounds are useful when the structure of the product is too complex to develop analytical or simulation valuation methods, or when the scarcity of data makes it difficult to make strong distributional assumptions on the risk factors. We illustrate our results by computing bounds on the price of a floating retention insurance contract, and a catastrophe equity put (CatEPut) option.