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CAT DERIVATES
NEW WAY TO INSURE CATASTROPHE LOSSES
Daniel Meyer
Daniel Meyer
2. INTRODUCTION
More natural disasters since 1970
Four times more from 100 to 400
Hurricane Andrew and Northridge earthquake sum up to
30 billion USD insurance loss
Possible rise to 100 billion USD
decrease of losses caused by
population growth
urban conglomerations
climatic change
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10.01.2012 Daniel Meyer
3. PROBLEM
The money of the insurance market is not sufficient
Traditional Reinsurances are inappropriately
30 billion USD correspond to 30% of the whole
insurance market
The rise of natural disasters will increase
Solution:
Need of a new source of capital
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4. SOLUTION FOR INSURANCE COMPANIES
Source Catastrophe Risk to the Capital market
Attractive investment options for new investors
Need of new financial products:
Cat-Bonds
Cat-Options
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5. CAT-BONDS
Simple finance product
fix payments addicted to a natural desaster
Three characteristics if a special trigger is achieved:
Loss of the whole money
Decrease of the monthly payments
No exposure payments anymore
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6. CAT-OPTIONS
More complex Instrument
Linked to a Catastrophic-Loss Index
Limited amount of losses or gains
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7. CONCLUSION
New ways to insure values Catastroph risk are needed
The Capital market is a good alternative to the insurance
market as a source of capital
About 13 trillion USD
Cat Derivates are a good alternative for investors to
traditionel financial products
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10.01.2012 Daniel Meyer