Financial Innovation in Property Catastrophe Reinsurance: The Convergence of Insurance and Capital Markets

Graciela Chichilnisky

MPRA Paper from University Library of Munich, Germany

Abstract: The property catastrophe reinsurance industry faces a major challenge. Since 1989, climatic volatility has produced unprecedented insured losses of $43 billion, $18 billion of which were from Hurricane Andrew alone. A surge of insurer defaults and dramatic changes in capacity and pricing have followed in their wake. Catastrophic risks must be addressed with innovative financial approaches that bring the insurance industry closer to the securities industry. This article discusses the new financial instruments that can be successfully used to hedge unknown catastrophe risks.

Keywords: insurance; catastrophe; financial markets; securitization; hedge; climate change; climate volatility; reinsurance; capacity; catastrophic risk; catastrophe bundles; catastrophe futures; law of large numbers; risk financing (search for similar items in EconPapers)
JEL-codes: G22 G32 Q54 (search for similar items in EconPapers)
Date: 1996
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:8333

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