Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Cat bonds need to expand to other lines of business say insurers


The capital markets and particularly catastrophe bonds have proved very good ways of absorbing the risks of natural disasters. Similar insurance-linked securities are now successfully transferring life insurance and longevity risks to the capital markets. But at a recent conference insurers highlighted the need and desire to expand the types of risks transferred to include other lines of business.

This article from Business Insurance discusses the conference and some of the ideas mooted by senior executives of insurers. Among the ideas suggested for market expansion are expanding the lines of business covered to include risks such as workers compensation and liability risks and also allowing cat bonds to address broader geographical coverage rather than peril and location specific risks.

Continued expansion of the catastrophe bond and alternative risk transfer market is inevitable. It’s long been discussed that cat bonds could potentially be utilised to hedge against toxic tort type liabilities and it’s easy to see how workers compensation could be covered using structures similar to longevity transactions. Personal injury risks are another line of business which could be packaged up and transferred to the capital markets. As well as expanding to other lines the market will also adapt (we believe) to allow for mini cat bonds which could be utilised by developing nations as a form of micro-insurance.

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