The accelerating convergence of insurance and reinsurance with capital markets and the resulting effect on the traditional insurance and reinsurance business model have topped the insurance news lately.

Executive Summary

It is possible—and likely—that casualty insurance risk will be transferred to the capital markets in the not-too-distant future, according to Verisk's Alex Korb, who explains that the casualty ILS market is most likely to develop around the overall casualty loss metrics rather than around event-specific casualty losses. In this article, he provides examples of how this might be accomplished using a casualty index developed by ISO.

Billions of dollars of capital inflows coming from outside the traditional reinsurance market into direct underwriting of insurance and reinsurance risks have significantly altered the pricing dynamic at key reinsurance renewals this year and firmly established insurance-linked securities (ILS) as the key component in ceding companies’ risk management toolkit, albeit largely limited to managing natural catastrophe risks.

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