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RPM Seminar

Special Topics

Level 1: No prior knowledge of the subject (0-3 Years)

Quantifying Risk Loads for Property Catastrophe Exposure: Using Cat Bonds to Infer Risk Premiums or Reinsurance Costs

ST-7 - Quantifying Risk Loads for Property Catastrophe Exposure: using Cat Bonds to Infer Risk Premiums or Reinsurance Costs

Monday, March 18, 2024
10:00 AM – 11:00 AM CST
CE: 1.2
The use of insurance-linked securities (ILS) has become commonplace among P&C insurance companies during the last 10 to 15 years, and a variety of ILS data is readily available from the capital markets. Catastrophe bonds are one form of ILS. In this session, catastrophe bond data available from the capital markets will be used to quantify the cost of catastrophe risk for property insurance. Several applications will be presented, including quantifying risk loads and evaluating the cost of catastrophe reinsurance. The presenters will also examine ways to allocate risk loads and reinsurance costs by geographic area. Additional implementation and practical considerations will be discussed by an insurance carrier that has relied on a similar methodology for several years.

Learning Objectives:

  • Develop an understanding of how catastrophe bonds work and the various metrics associated with catastrophe bonds that can be used to quantify risk
  • Learn how catastrophe bond metrics can be applied to property losses to estimate a provision that quantifies the cost of exposing capital to large catastrophic events
  • Discuss the benefits, potential challenges, or other considerations when implementing an independent methodology of quantifying risk loads for catastrophe exposure