CATASTROPHIC RISK: ANALYSIS AND MANAGEMENT

Transcription

1 CATASTROPHIC RISK: ANALYSIS AND MANAGEMENT Acknowledgments. About the author. PART I: IDENTIFICATION AND ANALYSIS OF CATASTROPHIC RISK. 1. Catastrophe and Risk. 1.1 Introduction. 1.2 The nature of catastrophe A definition Frequency Vulnerability Measuring severity. 1.3 The scope of impact. 1.4 Catastrophe and the risk management framework. 1.5 Overview of the book. 2. Risk Identification I: Perils. 2.1 Natural catastrophe Geophysical Meteorological/atmospheric Other natural disasters. 2.2 Man-made catastrophe Terrorism Industrial contamination Technological failure Financial dislocation. 2.3 Mega-catastrophe and clash loss. 3. Risk Identification II: Regional Vulnerability. 3.1 Spatial impact of natural catastrophes.

2 3.1.1 Bermuda and the North American Atlantic Coast Florida North American West Coast US Great Plains/Midwest Caribbean Mexico Japan South Asia/Southeast Asia Middle East/Near East Europe. 3.2 Spatial impact of man-made catastrophes North America Europe Asia/Pacific. 3.3 Urban vulnerabilities. 4. Modeling Catastrophic Risk. 4.1 The development and use of models. 4.2 The goals of catastrophe modeling. 4.3 General model construction Phase one: Hazard/peril assessment Phase two: Vulnerability assessment Phase three: Contract assessment A general example Other perils. 4.4 Challenges Model characteristics and assumptions Model validation Tail risks.

3 4.4.4 Data quality and granularity. PART II: MANAGEMENT OF CATASTROPHIC RISK. 5. Catastrophe and the Risk Management Framework. 5.1 Active risk management Enterprise value, liquidity, and solvency Loss control, loss financing, and risk reduction. 5.2 Risk monitoring. 5.3 Private and public sector efforts. 5.4 Sources of capital Insurers/reinsurers Investment funds Financial institutions. 5.5 Toward active risk management. 6. Catastrophe Insurance and Reinsurance. 6.1 Insurable risk and insurance Full insurance Partial insurance Captives. 6.2 Catastrophe insurance. 6.3 Reinsurance Facultative and treaty reinsurance Proportional and excess of loss agreements. 6.4 Catastrophe reinsurance. 6.5 Market cycles. 6.6 Internal risk management. 6.7 Challenges Pricing difficulties Earnings and capital volatility.

4 6.7.3 Concentrations Limits to insurability/uninsurable risks Lack of insurance/reinsurance penetration Capacity constraints Contagion effects and systemic concerns. 7. Catastrophe Bonds and Contingent Capital. 7.1 Overview of securitization. 7.2 Catastrophe bonds Standard structures Innovations Market focus and direction. 7.3 Contingent capital Standard structures Contingent debt Contingent equity. 7.4 Challenges Structural flaws Regulatory differences. 8. Catastrophe Derivatives. 8.1 Overview of derivatives Exchange-traded derivatives OTC derivatives. 8.2 Exchange-traded catastrophe derivatives. 8.3 OTC Catastrophe derivatives Catastrophe reinsurance swaps Pure catastrophe swaps Synthetic OTC structures. 8.4 Challenges.

5 8.4.1 Index construction and basis risks Lack of contract transparency One-way markets Pricing difficulties Regulatory barriers. 9. Public Sector Management and Financing. 9.1 Forms of public sector involvement Ex ante loss control measures Insurance/reinsurance Ex post crisis management Financing and subsidies Financial regulation. 9.2 Challenges Voluntary versus mandatory measures Public and private sector responsibilities Lack of market access and capacity. 10. Outlook and Conclusions Loss control Loss control implementation Enforcing urban planning Quantification Modeling requirements Transparency Complexity of terrorism Loss financing Vulnerabilities and risk capacity Discriminatory funding and insurance Government participation.

6 Optimal government role Limited government resources Adverse incentives Market deregulation General management Sub-optimal management Sustainability of solutions Preparing for the mega-catastrophe Amalgamated solutions Learning from past events. Bibliography. Index.