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What are ILS and how are they being used to bridge  the gap between economic and insured losses?

Toby Pughe, FCII. 53 pages. English.

The Burning issue for Boardrooms, Sovereigns, and the (Re)insurance Market.

Toby Pughe, FCII. English. 102 pages.

Why the ILS Market is Perfectly Positioned to Save Emerging Markets.

Toby Pughe, FCII. 3 pages.

Book by J David Cummins & Olivier Mahul, 299 pages.

This paper explores the market forces leading to rising interest in non-nat cat ILS alternatives, the differences between these products and traditional nat cat ILS products, and the crucial factors institutional investors and hedge fund managers should consider when deciding whether or not to move into this space.

Increasing demand for cyber re/insurance and a shortage of supply have made the need for fresh risk capital acute. After years of seeking support from the insurance linked securities (ILS) market, re/insurers may be on the brink of a major change. Property Claim Services, a Verisk business, has conducted original research with 24 ILS funds representing nearly 80% of the sector as measured by assets under management. ILS appetite for cyber re/insurance risk has increased, with many funds interested in entering the market this year. Historical barriers such as structure and modeling may not be as problematic as they were in the past, and narrowing spreads on cyber ILS have made the risk more attainable for providers of collateralized protection. Market dynamics have pushed pricing to levels that ILS funds can reasonably contemplate, which means that scale may soon follow.
 
 

Kirill Savrassov. Video 12min. English.

Kirill Savrassov, Clive O’Connell, Despoina Makariou. Video. English. 1hr 57min.

The first catastrophe bonds were issued in the mid-1990s and the market has been steadily growing since that time. The most recent Risk Center Primer, by Alexander Braun and Carolyn Kousky, explains the general mechanics of catastrophe bonds, provides examples of their use, and outlines future opportunities for the market. 10 Pages.

Gaps in response funding immediately after disaster can now be addressed through a new form of insurance.

Societies continue to bear increasing costs from natural hazards as population growth, the geographic concentration of economic and infrastructural assets in vulnerable areas, and the effects of climate change are accelerating exposure to potential losses.

The financial losses from disasters are a systemic financial risk. They cascade through the financial system, with capital flight from vulnerable sectors and communities, sovereign credit risk, sovereign defaults, sudden and sharp write downs from devaluation and insurance premiums. This can create new risks and/or reinforce existing inequalities. Ultimately, they challenge the ability to raise investment to increase resilience.  

Resilience requires a layered financial strategy bringing to bear all sources of financing and risk prevention projects need to draw on all potential beneficiaries for funding. Innovative financing models such as blended finance and impact investing have emerged as tools for addressing risks and encouraging the private investments that can transform people’s lives and contribute toward Sendai Framework implementation. This session will discuss and explore the implementation and scale-up of innovative market-driven products and options for the financing of resilience.

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