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10.01.2012
CAT DERIVATES
NEW WAY TO INSURE CATASTROPHE LOSSES

Daniel Meyer
Daniel Meyer

INTRODUCTION
 More natural disasters since 1970
 Four times more from 100 to 400

 Hurricane Andrew and Northridge earthquake sum up to
30 billion USD insurance loss
 Possible rise to 100 billion USD

 decrease of losses caused by
 population growth
 urban conglomerations
 climatic change

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10.01.2012 Daniel Meyer

PROBLEM
 The money of the insurance market is not sufficient
 Traditional Reinsurances are inappropriately

 30 billion USD correspond to 30% of the whole
insurance market
 The rise of natural disasters will increase

Solution:
 Need of a new source of capital

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SOLUTION FOR INSURANCE COMPANIES
 Source Catastrophe Risk to the Capital market
 Attractive investment options for new investors

 Need of new financial products:
 Cat-Bonds
 Cat-Options

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CAT-BONDS
 Simple finance product
 fix payments addicted to a natural desaster

 Three characteristics if a special trigger is achieved:
 Loss of the whole money
 Decrease of the monthly payments
 No exposure payments anymore

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CAT-OPTIONS
 More complex Instrument
 Linked to a Catastrophic-Loss Index

 Limited amount of losses or gains

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CONCLUSION
 New ways to insure values Catastroph risk are needed
 The Capital market is a good alternative to the insurance
market as a source of capital
 About 13 trillion USD
 Cat Derivates are a good alternative for investors to
traditionel financial products

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