Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Unnatural catastrophes; man-made loss events becoming more frequent


The topics covered by us here at Artemis are mostly devoted to natural catastrophes and the methods utilised for hedging against them to protect the balance-sheet of re/insurers and cedents. Guy Carpenter have published a report looking at the volume of man-made losses and types of events which caused them during 2008. The annual average losses for these types of events is $4.8b, 2008 delivered 46% more than that and final loss figures are around $7b. Nineteen known events resulted in losses of more than $50m each.

Those are large figures, all of which will impact re/insurers in the future (if not already). So what’s being done to hedge exposure to these types of events? Currently not very much. Catastrophe bonds seem limited to natural catastrophes and exchange traded instruments don’t really seem suitable in their current form to help companies trade these risks as a way to get them off the balance sheet.

We thought it would be interesting to begin a discussion on man-made disasters and whether the risk transfer instruments used to hedge against weather and catastrophe risks could be put to some use to help protect companies from the losses incurred from unnatural catastrophes. We’d like to know what you think, so please comment!

You can download the full report from Guy Carpenter here. A list of the major losses mentioned in the report is below.

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