Summary

The reference has not verified this book in detail; the summary states only what the title, author and subject establish.

This is a technical treatment of insurance-linked securities, the instruments through which insurance and reinsurance risk is transferred to capital markets. The category covers catastrophe bonds, industry loss warranties, sidecars and life-related structures such as embedded value securitisations and longevity transactions.

The reference has not yet verified this volume's contents in detail. The subject is established by the title and by the author's work in the field, and this entry does not go beyond describing the instrument class. Readers should note that the market has changed substantially since 2011, with catastrophe bond issuance growing several times over, with collateralised reinsurance becoming the larger share of alternative capital, and with loss experience from major hurricanes and wildfires testing the modelling assumptions on which the instruments are priced.

Key takeaways 5

Catastrophe bonds transfer defined insurance losses to investors and return principal only if the specified event does not occur.
Insurance-linked returns are largely uncorrelated with financial markets because their trigger is a physical event.
Trigger design determines basis risk, and indemnity, industry-index and parametric triggers allocate that risk differently between sponsor and investor.
Pricing depends on catastrophe models whose assumptions about event frequency are contested and periodically revised.
Collateral arrangements determine whether the investor bears credit risk in addition to event risk.

Who should read it

Institutional investors and insurance professionals wanting a technical reference on catastrophe and life risk transfer, with the caveat that this entry is not verified in detail.