3 // THE DISASTER GAP: HOW INSURERS AND THE CAPITAL MARKETS CAN HARNESS BIG DATA TO CLOSE THE GAP
At the 2013 annual Asia Pacific Risk and Insurance Association (APRIA) Conference, held in New York, BNY Mellon moderated a panel on the role of cat bonds. The conference was attended by more than 200 delegates from 23 countries. Eighty percent of the audience said they believed that ILS, through partnership between nation states, insurers and the capital markets, offers the financial services industry an opportunity to demonstrate its positive contribution to society.
Never has the experience of the insurer been needed more. Deploying capital against much needed cover over non-modelled exposures requires deep underwriting and technical expertise. It is unlikely that the capital markets would provide this cover in the absence of insurers’ expertise and the comfort that comes from seeing the insurer also deploying its capital against these previously uncovered risks.
Invariably, there will also be further innovation in the various structures or special purpose vehicles. Here, we urge caution. It would be unfortunate if both issuer and investor understood the risks and returns on offer, only to fall foul of a shortcoming in vehicle design. For example, you may remember at the time of the financial crisis a handful of bonds were impacted by having Lehman Brothers as a total return swap counterparty. Consequently, the investment of the collateral tends to be more straightforward these days.
I am very grateful for the knowledge and insight that has been provided by our diverse range of contributors. I hope you enjoy this paper and that it informs your thinking as you prepare for the changes this new capital heralds.
Paul Traynor, Head of Insurance Segment, International, BNY Mellon
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24