Great site, very well written and great explanations of insurance industry dynamics.
How insurance risk is transformed into investable assets
11–20 of 45 posts
Re: How insurance risk is transformed into investable assets
#12There are a lot of interesting dynamics in this market. For example, CAT bonds are generally tied to the specific natural hazard ("this bond triggers if a hurricane of Category 3 or higher land falls in this segment of Florida") or to industry losses, as estimated by an agreed upon source. This means that a CAT bond is correlated with, but not directly informed by an insurer's actual loss experience. Traditional rein…
Curious what major trends you’re seeing in your line of work. Guessing global warming induced increase in weather related hazards in some places - anything that would be surprising to people outside the industry?
Re: How insurance risk is transformed into investable assets
#13I've asked two financial advisors about CAT bonds. One had never heard of them and the other said were about as risky as crypto. I guess this is such a niche product that there isn't widespread knowledge about it. I wonder how much more diversified $ILS could be if it were larger. Would a 10x increase in assets under management give it significantly less volatility because it could do a better job spreading risk arou…
It has been growing slowly for the past 25 years. The limited market size is a reflection of the demand by traditional insurers and reinsurers, for alternative sources of capital. This is as it should be.. when traditional players start transferring risk to the capital markets motivated by the fees involved, or cheaper rates (premium), then you really start worrying about moral hazard i.e. ‘bad risks’ getting transferred to investors.
Re: How insurance risk is transformed into investable assets
#14Blown away by the traffic from this post! For the web designers here please let me know if you noticed anything amiss. Ive had particular issues getting captchas working so please comment if you run into that issue.
> For the web designers here please let me know if you noticed anything amiss.
The images some of the visuals do not show in reader view in Safari and Firefox. Other than that, the content is well laid out and very readable.
Re: How insurance risk is transformed into investable assets
#15What a wonderful read! This is why I come to HN: technical, yet approachable, discussions on topics I didn't even know existed. Thank you for sharing!
Re: How insurance risk is transformed into investable assets
#16Blown away by the traffic from this post! For the web designers here please let me know if you noticed anything amiss. Ive had particular issues getting captchas working so please comment if you run into that issue.
Very minor nit: "It's clear that we this structure,..."
Cool article, it's a clear explanation of something I never knew about.
Re: How insurance risk is transformed into investable assets
#17Blown away by the traffic from this post! For the web designers here please let me know if you noticed anything amiss. Ive had particular issues getting captchas working so please comment if you run into that issue.
Thanks for sharing your insight. Wouldn't hurt from a proofread. There are some typos / wrong words, that detract from the sense of authority lent by the article. Eg:
"It's clear that we this structure" --> with
"with out those protections in place" --> without
"Investors would be best to limit their exposer to losses beyond their investment" --> exposure
There might have been others, I had to go back and skim to summarize for you.
Re: How insurance risk is transformed into investable assets
#18I've asked two financial advisors about CAT bonds. One had never heard of them and the other said were about as risky as crypto. I guess this is such a niche product that there isn't widespread knowledge about it. I wonder how much more diversified $ILS could be if it were larger. Would a 10x increase in assets under management give it significantly less volatility because it could do a better job spreading risk arou…
The lack of information was my inspiration for building Riskvest. I called my own broker and when I said catastrophic bonds they asked if I meant buying bonds already in default. On the risk side - your comments here are part of the myth I’m trying to dispel and will have lots more to say in future posts. Yes for a single CAT bond you are exposed to potential 100% principle losses. But if you buy a bundle of CAT bond…
> But if you buy a bundle of CAT bonds that focus on say California Earthquake, Florida Hurricane, Japanese Typhoon, and a Cyber Event, you can imagine the diversification benefit you get there.
Yeah, but imagine how bad a day you're having if all of those disasters happen at once, and then as a cherry on top you lose all your money.
Re: How insurance risk is transformed into investable assets
#19This feels like when Selena Gomez explained CDOs in The Big Short.
Re: How insurance risk is transformed into investable assets
#20This feels like when Selena Gomez explained CDOs in The Big Short.
(Margot Robbie)