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Original Risk: A Society for Change Agents

Electronic transfer of natural catastrophe risks


Reinsurance Magazine has a great article on the current state of electronic trading in reinsurance and catastrophe futures. It discusses the state of markets such as the IFEX, Re-Ex and the burgeoning Carvill Hurricane Index and their potential for growth.

The time is ripe for electronic trading of risks. With so many securities, options, derivatives and futures for other products being traded electronically, why not the catastrophe products? A market so entrenched in data and analytics should be easy to translate to electronic transfer.

The real end-goal in my opinion should be translating catastrophe futures into a product that an end user can purchase directly. Weatherbill is showing that you can simplify weather derivatives to a point where a business owner can participate in the market indirectly by buying something that seems much more familiar and like normal insurance. This is where the catastrophe risk markets need to get to. If you could translate cat futures into something simpler and more easy to see the benefits of, so that end users can get cover themselves without needing a finance degree then online trading would fly.

You can read the full article here.

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