Alternative Risk Transfer and Insurance-Linked Securities: Trends, Challenges and New Market Opportunities

Item Type Book
Abstract

Due to their relatively high yields and low return correlations with traditional asset classes, insurance-linked securities (ILS) are often described as an attractive investment opportunity. Yet, the investor base for ILS is largely dominated by a few specialized investment managers. The aim of this paper is to analyze advantages and disadvantages, the current market development and the decision-making processes that drive the demand for this aspiring asset class. To reach this aim, we first review the existing knowledge on ILS instruments and markets, then present results of a new international survey among ILS Investors and finally, based on the results of the first and second step, derive implications for the future development of ILS.

The key findings of our study can be summarized as follows: To date, transaction costs along with lacking experience / knowledge and regulatory uncertainty are the most significant impediments to ILS market expansion. Skin in the game is necessary to attract investors; we show that a 5 to 10% sponsor investment leads to large increases in the willingness to invest. We observe that investors do not consider ratings as necessary and that having no rating is better than having a bad rating. Overall, the ILS market is likely to grow substantially over the next years; the survey participants expect its volume to double by 2019. In this context, we discuss the role of new instruments such as protected cell companies and new types of risks such as cyber risk, high frequency risks or run-off risks.

Authors Ben Ammar, Semir; Braun, Alexander & Eling, Martin
Language English
Subjects business studies
HSG Classification contribution to practical use / society
Refereed No
Date 2015
Publisher Institute of Insurance Economics IVW-HSG
Place of Publication St. Gallen
Series Name I.VW-HSG-Schriftenreihe
Volume 56
Page Range 162
Number of Pages 162
ISBN 978-3-7297-2000-8
Official URL https://www.ivw.unisg.ch/_/media/internet/content/...
Depositing User Dr. Semir Ben Ammar
Date Deposited 30 Jun 2015 13:56
Last Modified 08 Jun 2018 11:56
URI: https://www.alexandria.unisg.ch/publications/242019

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Citation

Ben Ammar, Semir; Braun, Alexander & Eling, Martin : Alternative Risk Transfer and Insurance-Linked Securities: Trends, Challenges and New Market Opportunities. 56. St. Gallen : Institute of Insurance Economics IVW-HSG, 2015, - ISBN 978-3-7297-2000-8.

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https://www.alexandria.unisg.ch/id/eprint/242019
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