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Convergence of Insurance and Financial Markets: Hybrid and Securitized Risk‐Transfer Solutions
Author(s) -
Cummins J. David,
Weiss Mary A.
Publication year - 2009
Publication title -
journal of risk and insurance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.055
H-Index - 63
eISSN - 1539-6975
pISSN - 0022-4367
DOI - 10.1111/j.1539-6975.2009.01311.x
Subject(s) - futures contract , underwriting , reinsurance , business , financial services , capital market , finance , convergence (economics) , securitization , financial market , indirect finance , financial asset , structured finance , risk management , derivatives market , financial risk , financial system , economics , financial crisis , economic growth , macroeconomics
One of the most significant economic developments of the past decade has been the convergence of the financial services industry, particularly the capital markets and (re)insurance sectors. Convergence has been driven by the increase in the frequency and severity of catastrophic risk, market inefficiencies created by (re)insurance underwriting cycles, advances in computing and communications technologies, the emergence of enterprise risk management, and other factors. These developments have led to the development of hybrid insurance/financial instruments that blend elements of financial contracts with traditional reinsurance as well as new financial instruments patterned on asset‐backed securities, futures, and options that provide direct access to capital markets. This article provides a survey and overview of the hybrid and pure financial markets instruments and provides new information on the pricing and returns on contracts such as industry loss warranties and Cat bonds.