2008, English, Article, Working paper edition: Catastrophe risk pricing [electronic resource] : an empirical analysis / Morton Lane, Olivier Mahul. Lane, Morton.

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Bookmark: http://trove.nla.gov.au/version/38724979
Published
  • [Washington, D.C. : World Bank, 2008]
Language
  • English

Edition details

Title
  • Catastrophe risk pricing : an empirical analysis /​ Morton Lane, Olivier Mahul.
Author
  • Lane, Morton.
Other Authors
  • Mahul, Olivier.
  • World Bank
Published
  • [Washington, D.C. : World Bank, 2008]
Medium
  • [electronic resource]
Series
Subjects
Summary
  • "The price of catastrophe risks is viewed by many to be too high and/​or too volatile. Catastrophe risk practitioners point out that, contrary to standard insurance, such as automobile insurance, catastrophe re-insurance is exposed to infrequent but potentially very large losses. It thus requires keeping a large amount of capital in hand, generating a cost of capital to be added to the long-term expected loss. This paper pulls together data from about 250 catastrophe bonds issued on the capital markets to investigate how catastrophe risks are priced. The analysis reveals that catastrophe risk prices are a function of the underlying peril, the expected loss, the wider capital market cycle, and the risk profile of the transaction. The market-based catastrophe risk price is estimated to be 2.69 times the expected loss over the long term, that is, the long-term average multiple is 2.69. When adjusted from the market cycle, the multiple is estimated at 2.33. Peak perils like US Wind are shown to have a much higher multiple than that of non-peak perils like Japan Wind, revealing the diversification of credit from the market. "--World Bank web site.
Notes
  • Title from PDF file as viewed on 5/​12/​2009.
  • Includes bibliographical references.
  • Also available in print.
Technical Details
  • System requirements: Adobe Acrobat Reader.
  • Mode of access: World Wide Web.
Language
  • English
Libraries Australia ID
Contributed by
Libraries Australia

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