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Cat

  1. 1. 12.01.2012 CAT-DERIVATESNEW WAY TO INSURE CATASTROPHE RISK Daniel Meyer Daniel Meyer
  2. 2. INTRODUCTION Increase of natural disasters since 1970 Four times more a year from 100 up to 400 times Hurricane Andrew (1992) and Northridge earthquake (1994) resulted in 30 billion USD in insured property losses Possible rise of catastrophe losses up to 100 billion USD Decrease of losses caused by  population growth  urban conglomerations  climatic change 212.01.2012 Daniel Meyer
  3. 3. PROBLEM The money of the insurance market is not sufficient Traditional reinsurances are inappropriately 100 billion USD correspond to 30% of the equity capital of US insurance market The occurrence of natural disasters will definitely increaseSolution: More efficient mechanism for financing CAT losses Need of a new source of capital 312.01.2012 Daniel Meyer
  4. 4. SOLUTION FOR INSURANCE COMPANIES Transfer catastrophe risk to the capital stock market Attractive investment possibilities for new investors Need of new financial products:  Cat-Bonds  Cat-Options 412.01.2012 Daniel Meyer
  5. 5. CAT-BONDS Simple finance product Issued by a insurance company fix payments addicted to a natural desaster Three characteristics if a special trigger point is achieved:  Loss of the whole money  Decrease of the monthly payments  No exposure payments anymore 512.01.2012 Daniel Meyer
  6. 6. CAT-OPTIONS More complex Instrument Traded on a stock exchange Linked to a Catastrophic-Loss Index Limited amount of losses or gains 612.01.2012 Daniel Meyer
  7. 7. CONCLUSION New ways to insure regions with high catastrophe 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 traditional financial products 712.01.2012 Daniel Meyer
  8. 8. THANKSFOR YOUR ATTENTION

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