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Annual Insurance Securitization Overviews
Pricing Risk Transfer Transactions
June 9, 2000. Published in The Astin Bulletin, Winter 2000.

By Morton N. Lane

INTRODUCTION
Should the pricing of reinsurance catastrophes be related to the price of the default risk embedded in corporate bonds?  

If not, why not? A risk is a risk is a risk, in whatever market it appears.  Shouldn’t the risk-prices in these different markets be comparable?  More basically perhaps, how should reinsurance prices and bond prices be set?  How does the market currently set them?  These questions are central to the inquiry contained in this paper.

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Trends in the Insurance-Linked Securities Market
May 31, 2000. Also Published in Derivatives Quarterly, Fall 2000.

By Morton N. Lane and Roger G. Beckwith

INTRODUCTION
There is some debate about when the Insurance-Linked Securities (ILS) market (a.k.a. Cat Bond market) began.  Was it June 1992 with the AIG-sponsored property-cat bond concept promoted by Merrill Lynch3?  Was it the end of 1992 when the CBOT launched its since-aborted ISO contract?  Or was it in 1995-96 with the first successful issuance of an AIG-fronted PXRE property-cat portfolio deal with additional small but successful portfolio deals from Georgetown Re and Reliance National?  Perhaps it was later in 1996 when USAA closed the first $500 million single-risk deal.

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Risk Cubes or Price, Risk and Ratings (Part II)
March 15, 1999. Also published in The Journal of Risk Finance, Vol.1, No. 1, Fall 1999.


INTRODUCTION

Risk is difficult to measure – so difficult that no single measure seems robust enough for all circumstances.  This is especially true of measuring the risk contained in insurance-linked securities.  Insurance risk is usually asymmetrically skewed.  As a consequence, traditional capital market risk measures – expected loss, probability of default and the standard deviation of return outcomes – are less than perfect to the insurance task.  Without a good risk measure, it is impossible to compare the risk-adjusted pricing of insurance-linked notes on a consistent basis.  It is impossible to tell which securities are cheap and which are expensive.  It is impossible to decide on their value relative to more traditional invest-ments.

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Price, Risk and Ratings for Insurance-Linked Notes
May 5, 1998. Published in "Rethinking Insurance Regulation 1998" conference proceedings featured in Derivatives Quarterly.

Morton N. Lane, Ph.D.
President & CEO
Sedgwick Lane Financial, LLC

In the past two years, more than $1 billion of insurance risk has been transferred directly to the capital markets in the form of a dozen or more insurance-linked notes and catastrophe bonds.  This new form of risk transfer, bypassing the conventional reinsurance market, is expected to grow to an annual issuance of $5-$10 billion by the end of the decade, making insurance-linked notes a new and significant asset class.

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A Year of Structuring Furiously
Promises, Promises, January 31, 1997. Also Published in Energy Insurance Review, Spring 1997.

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