Using Capital Markets to Develop Private Catastrophe Insurance
Author: John D. Pollner Date: 10/1/1999 (PDF, 200KB)
The global catastrophe insurance market exhibits inherent cyclical risks. Disaster-prone countries can improve their protection against catastrophic risk and premium volatility by using capital markets to boost the capacity of the private sector to absorb and spread the risks--both domestically and internationally. This Note proposes two mechanisms for more efficient management of catastrophic risk: pooled insurance coverage supported by liquidity and credit enhancement facilities, and hazard-indexed bonds to securitize risk.