Tom Johansmeyer, assistant vice president, reinsurance services, marketing at ISO/Verisk Insurance Solutions, debunks the five top myths of exchange-traded risk, an idea whose time has come once again.
After 25 years of false starts and valiant efforts that fell victim to unfortunate timing, we’re ready again. The global insurance and reinsurance market is clamouring for another attempt at launching an exchange-traded risk solution.
Our most recent previous attempt was only two years ago, but much has changed since then. Specifically, the ‘cat bond lite’ market has shown that insurance-linked securities (ILS) funds and reinsurers can act as sources of original risk (http://my.verisk.com/originalriskresources?source=iiarticle) in capital markets catastrophe risk transfer transactions—providing a better starting point than the industry has ever had.
Not surprisingly, scepticism abounds. After all, every new attempt at developing an exchange-traded risk platform probably seemed like a great idea at the time. To show that it’s different this time, we need to tackle head-on five important myths about the future of exchange-traded catastrophe options. Let’s get started!
Exchange-traded risk, reinsurance, ISO/Verisk Insurance Solutions, catastrophe, bond