What Drives Insurers' Demand for Cat Bond Investments? Evidence from a Pan-European Survey
Journal
Geneva Papers on Risk and Insurance - Issues and Practice
ISSN
1018-5895
ISSN-Digital
1468-0440
Type
journal article
Date Issued
2013-07-10
Author(s)
Abstract
Although catastrophe bonds are continuing to gain importance in today's risk transfer and capital markets, little is known about the decision-making processes that drive the demand for this aspiring asset class. In the paper at hand, we focus on one segment of the investing community. Our main research goal is to identify major determinants of the cat bond investment decision of insurance and reinsurance companies. For this purpose, we have conducted a comprehensive survey among senior executives in the European insurance industry. Evaluating the resulting data set by means of exploratory factor analysis and logistic regression methodology, we are able to show that the expertise and experience with regard to cat bonds, the perceived fit of the instrument with the prevailing asset and liability management strategy, as well as the applicable regulatory regime are significant drivers of an insurer's propensity to invest. These statistical findings are supported by further qualitative survey results and additional information from structured interviews with the investment managers
of four large dedicated cat bond funds.
of four large dedicated cat bond funds.
Language
English
Keywords
Cat Bonds
Investment Decision
Insurance Companies
Exploratory Factor Analysis
Logistic Regression
Expert Interviews
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Palgrave Macmillan Ltd.
Publisher place
Hampshire UK
Volume
38
Number
3
Start page
580
End page
611
Pages
32
Subject(s)
Division(s)
Eprints ID
212674