HOW DO YOUR ODDS REALLY STACK UP IN NATURE’S CASINO?
Speaker: Alexander Pui, Willis Towers Watson
Seminar Date: Tuesday August 9 2016, 12.00pm
Abstract: Aptly dubbed as ‘Nature’s Casino’ by best-selling author Michael Lewis, the Insurance Linked Securities (ILS) market represents the confluence between catastrophe reinsurance, speculative finance and information technology. The emergence of catastrophe bonds (cat bonds) and other methods of alternative risk transfer (compared to traditional (re)insurance) has piqued both greater interest from a broader range of investors and has not escaped the watchful eye of the regulator. As such, how ‘safe’ is this exotic investment class? This question is addressed first by introducing the pricing and structuring dynamics of these financial instruments at issuance, before assessing a select number of cat bonds that ‘triggered’ and resulted in complete exhaustion. Themes such as counter party credit risk, price discovery, diversification opportunity and the balancing of competing interests between issuer and investor will also be discussed.