Felix Kloman of Risk Management Reports estimated that $21
billion in total annual premiums were paid to captives in 1999.
The Air Transport Association and Marsh, an insurer, are in the process
of establishing Equitime, a captive, backed by the US government as an
insurer of last resort. With an initial capital of $300 million, it
will offer up to $1.5 billion per airline for passenger and third party
war and terror risks.
Some insurance companies - and corporations, such as Disney - have been
issuing high yielding CAT (catastrophe) bonds since 1994. These lose
their value - partly or wholly - in the event of a disaster. The money
raised underwrites a reinsurance or a primary insurance contract.
According to an article published by Kathryn Westover of Strategic Risk
Solutions in "Financing Risk and Reinsurance", most CATs are issued by
captive Special Purpose Vehicles (SPV's) registered in offshore havens.
This did not contribute to the bonds' transparency - or popularity.
An additional twist comes in the form of Catastrophe Equity Put Options
which oblige their holder to purchase the equity of the insured at a
pre-determined price. Other derivatives offer exposure to insurance
risks.
Pages:
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90