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2018 DRR Financing 5.2 Clive O` Connell

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Legal Considerations and Insurance Management Issues

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2018 DRR Financing 5.2 Clive O` Connell

  1. 1. Legal considerations & insurance management issues. Clive O’Connell McCarthy Denning London
  2. 2. Catastrophe Bonds and Insurance • Key elements of insurance – Insurable Interest – Proof of loss • Implications in context of Natural Disasters – Insurance gap – Delay – Lack of Flexibility
  3. 3. Catastrophe Bonds and Insurance • Solution – Catastrophe Bonds (CAT Bonds) • Development of CAT Bonds • Uses of CAT Bonds
  4. 4. Examples of Government Sponsored CAT Bonds • New York Metropolitan Transportation Authority • US National Flood Insurance Program • Florida Hurricane Catastrophe Fund • Texas Windstorm Insurance Association • California Earthquake Authority • Caribbean Catastrophe Risk Insurance Facility • Mexican government • China Re • Turkish Catastrophe Pool • Japanese National Mutual Insurance Federation of Agricultural Cooperatives • African Risk Capacity
  5. 5. Structure of CAT Bonds Sponsor SPV Investors Collateral Account Losses Premiums Return of Principal Note Proceeds Floating rate + spread
  6. 6. Structure of CAT Bonds Protected Cell Companies/Captives (PCCs)
  7. 7. Structure of CAT Bonds Protected Cell Companies/Captives (PCCs)
  8. 8. Key Legal Issues for CAT Bonds • Jurisdiction – Regulatory framework – Regulatory reputation – Available structures – Speed and agility of regulators – Fiscal regime – Legal regime – Enforceability of performance
  9. 9. Key Legal Issues for CAT Bonds • Established Jurisdictions – Bermuda – Cayman Islands – Gibraltar – Ireland – Singapore – UK • Local CAT Bonds
  10. 10. Key Legal Issues for CAT Bonds • Triggers – Indemnity Triggers – Index Triggers – Double Triggers – Parametric Triggers
  11. 11. Key Legal Issues for CAT Bonds • Parametric Triggers – Modellable – Definite – Easily determinable – Objective – Free from interference – Properly defined
  12. 12. Legal considerations & insurance management issues. Clive O’Connell McCarthy Denning coconnell@mccarthydenning.com +44 7774 267149

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