HomeAboutServicesPublicationsLinksContact Us
 
Publications
View by Date
View by Category
Essays and Commentaries
Whither Securitization
April 30, 2002,

Excerpt from Alternative Risk Strategies, Morton Lane, ed., Risk Books, 2002

By Morton N. Lane

INTRODUCTION
[This paper is the closing editorial chapter of a book entitled Alternative Risk Strategies, edited by Morton Lane, published by Risk Books and due for publication in May 2002.  Details of the multi-contributor book can be found on www.riskbooks.com.  The substance of the chapter was also the subject of Morton Lane’s address to the Bond Market Association’s Second Annual Meeting at Turnberry Isle in March 2002.  While there are references to particular chapters in the book, this chapter stands as a separate piece.]

To read the full version of this article with graphs:

Image Download the PDF Here
 
Premium Increases for the January 1 Renewals
October 8, 2001, The Message of the Markets

By Morton N. Lane and Roger G. Beckwith

INTRODUCTION
Two questions have consumed the reinsurance industry now that the sadness and emotional shock from the awful events of September 11, 2001 have given way to consideration of future business.  The first is the size of the loss to the industry, said to be between $35billion and $70billion.  The second, obviously dependant on that first answer, is how much will premiums rise?  Anecdotal evidence says increases of 40% to 100% can be expected in the cat market.  (We confine ourselves to the cat market in this Note.)  But how satisfactory is the anecdotal evidence?  Are there other ways to gauge expected increases?  We suggested as much in March this year in our paper “Stirrings in the Secondary Markets.”  Now is the time to test the assertions we made there.  We do this not only to obtain a more precise estimate ourselves (recognizing that the picture is still unfolding), but also to test whether our instincts are consistent with “the market.”

To read the full version of this article with graphs:

Image Download the PDF Here
 
Alternative Capital Sources
December 15, 2002,

Excerpt from Rational Reinsurance Buying, Nick Golden, ed. Risk Books 2002

By Morton N. Lane, Ph.D.

INTRODUCTION
The above definition of “capital” captures two things; first, the essential meaning of capital as the resource necessary for production of wealth and, second, the fact that capital can mean many things to many people.  On the other hand, one thing that may be missing is any reference to the relation between risk and capital.  The definition was written before the modern capital market theories were expounded, yet it does capture the essentials —present value of income, etc.—before the significant contributions of Black, Scholes, Merton and other modern finance theorists formalized the concepts.  The theories contributed by these Nobel Laureates added to our general understanding of capital markets, and the insights allowed a proliferation of new, innovative instruments by which capital can be accessed and managed. Swaps, options, futures, collateralized debt obligations (CDOs), converts, caps, floors, collars, Remics, collateralized mortgage obligations (CMOs) and derivatives of all kinds are all aids in the use of capital to produce wealth.

To read the full version of this article with graphs:

Image Download the PDF Here
 
Stirrings in the Secondary Market
March 8, 2001.

By Morton N. Lane
 
INTRODUCTION
There is some evidence that the secondary market for insurance-linked securities (ILS) is beginning to stir.  It is faint, but we think it is important.  Viable secondary markets contain important intelligence about underlying trends.  In the ILS market, where underlying (reinsurance) price trends are hard for outsiders to discern, secondary market prices could provide valuable investor information.  This allows investors to better evaluate new transactions.  It also gives issuers a better insight into what new issue prices would be acceptable in the capital market.  So far, the still nascent ILS market has provided little price information outside of new issue prices.

To read the full version of this article with graphs:

Image Download the PDF Here
 
What the World Bank Should Do About Catastrophic Risk

What should The World Bank do about it?  A Personal View, January 15, 1999. Based on a presentation to The World Bank Disaster Funding Seminar, "Financial Management of High Severity Risk in Developing Countries", September 22, 1998, Washington D.C.

By Morton Lane

Today’s seminar has shown that “insurance risk management is not just your father’s homeowners policy” (to poorly paraphrase the Oldsmobile slogan of some years ago).  The preceding speakers have expertly demonstrated that: (a) traditional insurance and reinsurance against catastrophes has grown dramatically in the developed world; (b) that both risk-transfer and funded cover mechanisms are available for catastrophe protection; (c) that there has been a convergence between financial and insurance markets instruments; (d) that large institutions are protecting themselves against catastrophes by issuing catastrophe bonds and derivatives as well as buying traditional reinsurance; and (e) finally, that these new forms of protection use “index” or “parametric” measures as well as indemnity losses, thereby expanding their usefulness to developing areas.  All in all, some huge changes are rippling through the staid world of insurance, and the World Bank is to be congratulated for organizing so timely a seminar for its self-education.

To read the full version of this article with graphs:

Image Download the PDF Here
 
AQS
December 23, 1998

The basic idea is very simple:  Let the share for which the option (or under) writer is responsible increase as the penetration of the layer gets larger.

The purpose of this structure is to reduce the cost of traditional excess of loss (or pure option) coverage.  At the same time, the structure reduces volatility and provides for fuller coverage as losses increase.

First proposed in the context of a price guarantee program, the examples that follow are for Puts (or profit share) structures, but they work equally well for Calls (or loss-share) programs.

To read the full version of this article with graphs:

Image Download the PDF Here
 
Isolating the Effects of the Price Cycle on the Lloyd's Global Index
December 15, 1998. Also published in The Risk Financier, March 1999.
 
INSTRAT-UK recently proposed an index of underwriting results based upon the Lloyd’s Global result.  Since the index applies to a broad range of underwriting lines, it is a good gauge of the whole insurance market, and, perhaps, a good hedge of particular underwriting results.

Interest has begun to focus on the prices at which options on this index might trade.

To read the full version of this article with graphs:

Image Download the PDF Here
 
Flatlining
October 1, 1998. Also published in Insurance Finance & Investment, November 16, 1998.

What the heck is a zero beta asset?

Whaddaya mean new asset class?

Correlation coefficient?

You’ve got to be kidding me, adding earthquakes to my portfolio can actually reduce my risk!

Initial investor reaction to presentations about insurance-linked notes and their benefits in diversifying a portfolio often range from disbelief to scorn.  At best they are skeptical and we, like others, try to persuade them of our rationality with explanations about “efficient frontiers,” “diversification,” and “lower standard deviations”.  Pure as these theoretical arguments are, they are not always convincing.

To read the full version of this article with graphs:

Image Download the PDF Here
 
Echoes from the East
ECHOES FROM THE EAST
LESSONS FROM THE PAST
THOUGHTS FOR THE FUTURE

Lessons from the Past, Thoughts for the Future, September 1, 1998.

Some people think of 1992 as the year of Bill and Gennifer; others remember it as the year of Andrew and Inikki.

Current events have forced the former crowd to ruefully acknowledge that telltale events from the past have relevance for the present.

For the Andrew and Inikki crowd, however, current events have provided no such reminders.  Recent history in reinsurance terms has been benign.  Many of the lessons of 1992 have slipped off the radar screen.

To read the full version of this article with graphs:

Image Download the PDF Here
 
Warren Buffett on Risk - Or Risky Ground?
May 15, 1998.

Mr. Buffett deserves the world’s accolades when it comes to investing.  He is the nonpareil equity investor.  When he speaks, the world, and I, properly pay attention.

Permit me, however, to take issue with several of his recent comments on bonds in general, and catastrophe bonds in particular, which appeared in Schiff’s and are excerpted alongside.

To read the full version of this article with graphs:

Image Download the PDF Here
 
<< Start < Prev 1 2 3 4 5 Next > End >>

Results 31 - 40 of 41