Securitization of disability risk via bonds and swaps

Alexander Hendrik Maegebier

Journal of Risk Finance, 2015, vol. 16, issue 4, 407-424

Abstract: Purpose - – Two strands of the literature are combined, namely the modeling of disability insurance and the design, valuation and discussion of insurance-linked securities. Design/methodology/approach - – This paper provides a discussion regarding the advantages and detriments of disability-linked securities in comparison with mortality-linked bonds and swaps as well as regarding potential disability-linked indices and the potential use. The discussion is followed by an introduction of a potential design and a corresponding valuation of disability bonds and swaps. Findings - – This securitization will provide useful tools for the risk management of disability risk in a risk-based regulatory framework. Originality/value - – No disability-linked securities have been defined and discussed so far.

Keywords: Alternative risk transfer; Disability insurance; Markov renewal process; Multi-state models; Securitization (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jrfpps:jrf-11-2014-0166

DOI: 10.1108/JRF-11-2014-0166

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