Catastrophe risk

A first kind of these insurance products are called "catastrophe bonds" and consist in securitizing environmental risks in bonds, which could be sold to high-yield investors. The catastrophe bonds are able to transfer risk to investors that receive coupons that are normally a reference rate plus an appropriate risk premium. By these products, insurance companies limit risk exposure transferring natural catastrophe risk into the capital markets. In this way, with the involvement of the financial markets, their global size offers enormous potential for insurers to diversify risks. 

Individuals and companies that buy insurance products could be stimulated to address climate change-seeking mechanism to facilitate mitigation of GHG emissions and adaptation to the inevitable impacts of climate change [16]. In addition, the insurance companies themselves are motivated to take significant actions to mitigate GHG emissions and increase adaptive capacity to reduce overall uncertainty and other barriers to insurability and are also motivated to limit the insurers potential exposure to catastrophic risks in excess of their capacity to avoid the potential for property and liability claims in excess. 

Physical processing conditions and even small amounts of extraneous materials (contaminants) that may have catalytic properties affect both the rate at which energy is released from an intended reaction and the potential damage. For this reason, many processes-which could be otherwise covered-may not present a catastrophic risk to workers under reasonable worst case scenarios. Moreover, even if the... 

Fioritto, A. and Simoncini, M. (2011) If and when. Towards standard-based regulation in the reduction of catastrophic risks , in A. Alemanno (ed.) Governing Disasters. The Challenges of Emergency Risk Regulation. Edward Elgar Cheltenham, pp. 115-136. 

The new-terrorism discourse is a discourse that fits very well in modern mass media because it presents terrorism as a societal, catastrophic risk. After 9/11 the terrorism risk is interpreted as a risk for us . Results from risk perception research shows that people tends to highly rate risks that can harm themselves or their family are perceived to be caused by something out of the person s control have large consequences and are threats to societies rather than individuals (Sjoberg, 2004). Consequently, the implications of the new terrorism-discourse raise pubHc fear and powerlessness. The society must then be structured in a way that reduces availability, opeimess and pubHc access. Crenshaw (2008) asks why the idea of the new terrorism is so attractive. Her answer is that one reason may be that the conception of the new terrorism supports the case for major poHtical change. 

AU the three storylines identified in this paper are storylines that fit in to the modem media picture they describe catastrophic risks. 

The picture unveiled from the media articles conclude on strengthening terrorism counter-measures Both stakeholders describe a catastrophic risk that could strike everyone everywhere for no political purpose. While the terrorist targets in the 1990s were more logical connected to the terrorists political agendas, the whole society is now a terrorist target. 

These measures, it is argued, are justified to meet increasingly high public expectations for railway safety, to avoid catastrophic risks, and to match good practice elsewhere. They imply a VPF of around 10m, and the industry has therefore adopted a comparable VPF to justify measures addressing certain other aspects of catastrophic risk. Examples are standards for on-train data recorders and for enhanced emergency braking. 

The key reasons driving the development of these technical programs are (1) rapid advances in technology, (2) desire to eliminate accidents in the workplace, (3) potential catastrophic risks, and (4) new regulations and guidelines from the government. The Occupational Safety and Health Administration (OSHA) recently enacted a process safety management (PSM) standard that requires employers to train their employees on process fundamentals. This standard applies to initial certification and recertification of employees. (See Chapter 2 for more details on the PSM standard.)... 

Nouri A and Chyba CF (2008) Biotechnology and biosecurity. In Bostrom N and Cirkovic MM (eds) Global Catastrophic Risks. Oxford University Press. 

Risks can be split into two main categories, namely catastrophic risk, which demands insurance, and risks associated wth wastage of the organisation s assets. The latter is where the scope of self-insm-ance and diminution of risk is most evident, and is why organisations appoint risk managers and sometimes establish risk management subsidiaries. 

While public perception of risk is sometimes frustrating to expert risk assessors, it can serve a useful purpose by focusing attention on catastrophic risks that impact whole communities, not just individuals. The risk of a meltdown at a nuclear power plant is small, but the consequences are huge Witness Chernobyl and the continuing effects of radioactive contamination. In the difficult political business of managing risks, risk perception can complement expert risk assessment and help drive the regulatory process forward. 

Head of Catastrophe Risk Research - EMEA, Guy Carpenter Company Ltd., London, UK... 

Natural catastrophe risk management Risk financing Seismic risk mitigation... 

The second section focuses on catastrophe risk models, the technology that makes global risk transfer more seamless and which since the 1980s has had an enormous impact on the industry. The discussion addresses earthquake risk models in particular. These models have played an important role in advances in financial tools that have brought an affluence of capital into earthquake reinsurance. Alternative risk transfer, the convergence market, CAT bonds, parametric solutions, industry indices, and modeled loss triggers, and their importance in earthquake risk transactions are addressed in the third section of the paper. 

Since catastrophe events are, however, relatively rare, there is a pervasive lack of reliable experience data on their likelihood and consequences. Therefore, assessing and pricing catastrophe risk constitute challenges that would persist until the appearance of numerical simulation models during the second half of the twentieth century. Thanks to this innovation, the quantification of probabilities and effects of physically complex catastrophes slowly starts becoming a standard practice. 

The insurance and reinsurance industry has traditionally used historical loss records to price fire, life, theft, and other risks on which there is plenty of experience data, and catastrophes were originally considered in conjunction with more common hazards. Ignoring their specific potential loss contribution resulted in unforeseen insolvencies for the insurance industry in events like hurricane Andrew in 1992. In order to better assess catastrophe risks, companies needed experience data that wasn t available. 

CAT models have improved the way in which the market manages and prices its catastrophic risks, and moreover, they have had a great impact on the industry by opening new avenues to transfer risks through the capital markets with more transparency. 

The financial markets have increasingly shown interest in catastrophe reinsurance operations as a source of diversification for investment portfolios. Through a series of new instruments, investors have traded in catastrophe risks thus acting as an alternative source of reinsurance capital. These alternative risk transfer (ART) solutions are today a common way to interact with the convergence market, the space where finance meets insurance (World Economic Forum 2008). 

CAT bonds have probably been the most successful instrument used to package catastrophe risks into a securitization. This solution consists of creating a special purpose vehicle, which acts as a reinsurer to a single entity and which holds the bond principal invested in safe, low-risk, short-term securities. Cummins (2008) presents a comprehensive view of the history and types of securitizations and derivatives that have been used in the market. 

Capital providers have had an interest in isolating catastrophe risk to avoid other components of risk that are already present in usual financial portfolios. Fully collateralized CAT bonds, for instance, have attracted interest since they ehm-inate the risk of default of the parties involved. 

The cases of Chile, New Zealand, or Turkey illustrate how countries can effectively transfer catastrophe risk to the global markets via their domestic insurance systems. A country may seek financial protection from the global markets in a more direct fashion in what is referred to as sovereign risk transfer. The development of insurance solutions in the sovereign space has... 

Over the last decade, Mexico has established itself as the first sovereign country that has effectively transferred some of its catastrophe risk outside of its borders via these novel instruments. The Mexican experience has been pioneering and has attracted much attention and interest It has also been the subject of several smdies that aimed to describe the features of the first transaction (Cardenas et al. 2007), optimize the efficiency of these tools in the context of other reinsurance strategies (Hardle and Lopez Cabrera 2010), or... 

Bisping M (2013) Risk transformation through capital markets. In Lane M (ed) Alternative (re)insurance strategies, 2nd edn. Risk Books, Chicago Clark K (1986) A Formal Approach to Catastrophe Risk Assessment and Management, in the Proceedings of the Casualty Actuarial Society, Vol. 73, Part 2, No. 140... 

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