Known Unknowns: The “black swan” is trumpeting! Last year, we saw the first-hand effects of random, unforeseen, and massive events. Catastrophe models — the tools we use to forecast disaster and protect capital — were shown to be quite fallible, leaving balance sheets exposed to more risk than carriers realized. Yet, maybe we’ve been a bit hasty in meting out blame.
Seasoned Sponsors Own Market, Mostly Primaries: Insurers outpaced reinsurers in terms of the amount of risk capital accessed via the catastrophe bond market in 2008. Primary insurers completed six transactions securing USD1.6 billion of protection from the catastrophe bond market in 2008, over USD 434 million more than the USD 1.1 billion accessed by reinsurers though seven transactions.
Risk Modeling Part I: Overview: The global financial crisis has increased the world’s focus on risk modeling, and for some it has called the very validity of the practice into question. Common themes resonating throughout the popular press include the difficulty of modeling human behavior and the complexity of the intricate webs of financial hedging that imploded to create the current crisis.
Risk Modeling Part IV: ERM: A misunderstanding of models and exposure data is not the primary cause of most modeling failures. Indeed, many companies that have suffered in recent catastrophes, both physical and financial, had substantial and sophisticated resources invested in risk analysis.
Shelf Offerings 100% of 2008 Issuances: Shelf offerings have become increasingly common in the catastrophe bond market. First introduced in 2002, this concept of creating a platform for multiple note issuances evolved from the medium-term note programs developed for corporate debt issuers in the capital markets.
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Guy Carpenter Receives Grant to Create Reinsurance Facility: Guy Carpenter & Company, LLC, the leading global risk and reinsurance specialist, has been awarded a grant by the Microinsurance Innovation Facility to develop a reinsurance facility for microinsurance and microfinance company operations (MFIs).