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2002
Alternative Risk Strategies |
Edited by Morton Lane, Risk Books, London 2002.
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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.
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An Analyst's View of the Aviation Insurance Industry |
September 1, 2002
By Morton N. Lane, Ph.D. INTRODUCTION The
events of September 11, 2001 generated devastating monetary losses for
the aviation insurance industry. Figure 1 shows the true extent of
that loss. Minor as these monetary losses are com¬pared the personal
trauma suffered by individuals, families and America as a whole, they
have produced their own trauma-induced monetary responses. Future
aviation insurance prices have risen dramatically, easily doubling and
in some cases quintupling. Exclu¬sions have been added to policies and
certain cover¬ages have been specifically withdrawn from the market.
More interestingly, having survived and put in place temporary
solutions to enable the market to move forward, the industry through
this conference and numerous internal reviews has begun to ask itself
how it should charge for its services, whether it has sufficient
capital and if past pricing practices should be perpetuated.
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Review of Trends in Insurance Securitization |
August 23, 2002
By Morton N. Lane, Ph.D. and Roger G. Beckwith
INTRODUCTION The
past year was dramatic in terms of capital-raising and new issuance for
the reinsurance industry. As Figure 1 shows, at least 41 companies
raised equity and/or debt between September 2001 and January 2002.
Unfortunately, not enough of the drama that occurred there was
reflected on the securitization stage. During the 12 months April 2001
to March 2002, only $860 million of insurance securitizations were
issued, representing a little over 4% of the traditional market’s
capital-raising effort. While events of the magnitude of 9/11 were
expected to give spur to the still-developing securitization market,
the concerns of the traditional market were too consuming to even think
about cat bonds for very long. New funds flowed all too easily to the
traditional market; there was little need for new types of capital.
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Meanwhile, Back at the Price Drawing Board |
August 23, 2002
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Recognizing the Costs of Options and Disguising the Cost of Insurance |
August 2, 2002
By Morton N. Lane, Ph.D.
In
one of those delicious ironies that occur from time to time, the August
1st edition of The Wall Street Journal contained two excellent
articles−one about options, the other about insurance−which when
juxtaposed, show the ever-present nature of contradictions between
finance theory and current corporate practice. The contradictions
exist side by side even in the full glare of the current soul searching
environment.
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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.]
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