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The Evolving Market for Catastrophic Event Risk

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  • Kenneth A. Froot

Abstract

ABSTRACT: In the last two years, the market for catastrophic event risk has witnessed important change. The first large and truly successful catastrophe (“CAT”) bonds have been issued. New exchanges have opened, traded contracts have been created, and indexes of CAT losses have been introduced. The array of products confronting issuers and investors has widened substantially. This article provides a brief overview of these changes. It also takes a functional approach to diagnosing the problems in the market for CAT event risk in order to understand how future change is likely to occur. Finally, it provides information to companies looking to assess whether these new markets are useful for solving their problems.

Suggested Citation

  • Kenneth A. Froot, 1999. "The Evolving Market for Catastrophic Event Risk," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 2(3), pages 1-28, September.
    • Handle: RePEc:bla:rmgtin:v:2:y:1999:i:3:p:1-28
    DOI: j.1540-6296.1999.tb00001.x
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    Cited by:

    1. Nell, Martin & Richter, Andreas, 2004. "Catastrophic events as threats to society: Private and public risk management strategies," Working Papers on Risk and Insurance 12, University of Hamburg, Institute for Risk and Insurance.
    2. Andreas Richter, 2004. "Moderne Finanzinstrumente im Rahmen des Katastrophen-Risk-Managements — Basisrisiko versus Ausfallrisiko," Schmalenbach Journal of Business Research, Springer, vol. 56(2), pages 99-121, March.
    3. Brown, Jeffrey R. & Kroszner, Randall S. & Jenn, Brian H., 2002. "Federal Terrorism Risk Insurance," National Tax Journal, National Tax Association;National Tax Journal, vol. 55(3), pages 647-657, September.
    4. Jeffrey R. Brown & Peter R. Orszag, 2006. "The Political Economy of Government‐Issued Longevity Bonds," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 73(4), pages 611-631, December.
    5. Benjamin M. Blau & Robert A. Van Ness & Chip Wade, 2008. "Capitalizing on Catastrophe: Short Selling Insurance Stocks Around Hurricanes Katrina and Rita," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 75(4), pages 967-996, December.
    6. Chen Yueyun & Hamwi Iskandar S., 2012. "Why Some Disaster Insurance Does not Exist," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 6(1), pages 1-16, February.
    7. Lisa Smack, 2016. "Catastrophe Bonds—Regulating a Growing Asset Class," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 19(1), pages 105-125, March.
    8. Chatoro, Marian & Mitra, Sovan & Pantelous, Athanasios A. & Shao, Jia, 2023. "Catastrophe bond pricing in the primary market: The issuer effect and pricing factors," International Review of Financial Analysis, Elsevier, vol. 85(C).
    9. Bates, David S., 2003. "Empirical option pricing: a retrospection," Journal of Econometrics, Elsevier, vol. 116(1-2), pages 387-404.
    10. Chang, Ching-Cheng & Hsu, Wenko & Su, Ming-Daw, 2008. "Modeling Flood Perils and Flood Insurance Program in Taiwan," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6141, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    11. Helmut Gründl & Danjela Guxha & Anastasia Kartasheva & Hato Schmeiser, 2021. "Insurability of pandemic risks," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 88(4), pages 863-902, December.

    More about this item

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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