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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:
 Download the PDF Here
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September 3, 2001.
By Morton N. Lane and Roger G Beckwith
INTRODUCTION
In
November 2000 Munich Re entered into a financial swap transaction with
a special purpose vehicle, PRIME Capital Hurricane Ltd. (PRIME), to
protect itself against losses resulting from severe hurricanes hitting
defined areas of New York and Miami. PRIME in turn funded its swap (or
counter party) obligation by issuing securities to capital market
investors. It issued $6 million Class B preference shares and $159
million Floating Rate Notes. PRIME agreed to pay its note purchasers
an interest rate of LIBOR plus 650 basis points quarterly for the next
three years. At the end of the three years the investors receive
return of their principal, if no hurricanes of the requisite intensity
have blown in the designated areas of New York and Miami. If an
adverse wind has blown, investors could lose all or part of their
principal.
To read the full version of this article with graphs:
Download the PDF Here
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Analyzing the Pricing of the 2001 Risk-Linked Securities Transactions |
July 31, 2001. Presented at the IIASA-DPRI meeting on Integrated Disaster Management in Laxenberg, Austria, August 2001.
By Morton N. Lane
INTRODUCTION
Ten
risk-linked securities (a.k.a. cat bonds) were issued between April 1,
2000 and March 31, 2001,2 representing almost 25% of the risk-linked
securities that have ever been issued. The reinsurance risks embedded
in these securities were similar to exposures contained in the previous
year’s issues (wind and quake), with new forms added and some new risks
covered. The exact character of the exposures was examined in an
earlier paper “Current Trends in Risk-Linked Securitizations”,
available on our web site (www.LaneFinancialLLC.com). The purpose of
this companion piece is to continue the analysis of these securities,
but to focus exclusively on their pricing.
To read the full version of this article with graphs:
Download the PDF Here
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Current Trends in Risk-Linked Securitizations |
April 30, 2001. Also published in Risk Magazine, August 2001
By Morton N. Lane and Roger G. Beckwith
INTRODUCTION
Towards
the end of the year 2000 any paper describing current trends in
insurance-linked (now fashionably dubbed risk-linked) securitization
would have been short. There was one trend to describe them:
declining -- to the point of disappearing -- issuance. In November,
however, Munich Re and AGF rode to the rescue. At 12-month end, given
our off-calendar summaries of activities (March to March), the score is
not so bad. Given completion of SR Wind, initiated in March but
completed in April, the box score for the last year is:
To read the full version of this article with graphs:
Download the PDF Here
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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:
Download the PDF Here
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