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Author: Claudio Morana Publisher: ISBN: Category : Languages : en Pages : 26
Book Description
Since their introduction in the mid-1990s, the return per unit of risk or multiple on catastrophe (cat) bonds has steadily declined. This paper investigates whether this pattern is consistent with the historical evolution of natural disaster risk. Assessing the accuracy of cat bond pricing is important, since about 50% of outstanding risk capital in the cat bonds market is currently exposed to Atlantic hurricanes -a risk that climate change, among other disruptions, is expected to enhance- and pension and mutual funds in European and other OECD countries currently own about 30% of the market. In this respect, while our findings suggest that falling multiples are primarily related to the Fed's expansionary monetary stance and to portfolio shift effects, we do also find evidence of significant undervaluation of natural disaster risk in the cat bonds market. This finding, also in light of the unfailing appetite of institutional investors for such securities, casts doubts over the sanity of the market and over cat bonds as suitable investment products for risk averse investors.
Author: Claudio Morana Publisher: ISBN: Category : Languages : en Pages : 26
Book Description
Since their introduction in the mid-1990s, the return per unit of risk or multiple on catastrophe (cat) bonds has steadily declined. This paper investigates whether this pattern is consistent with the historical evolution of natural disaster risk. Assessing the accuracy of cat bond pricing is important, since about 50% of outstanding risk capital in the cat bonds market is currently exposed to Atlantic hurricanes -a risk that climate change, among other disruptions, is expected to enhance- and pension and mutual funds in European and other OECD countries currently own about 30% of the market. In this respect, while our findings suggest that falling multiples are primarily related to the Fed's expansionary monetary stance and to portfolio shift effects, we do also find evidence of significant undervaluation of natural disaster risk in the cat bonds market. This finding, also in light of the unfailing appetite of institutional investors for such securities, casts doubts over the sanity of the market and over cat bonds as suitable investment products for risk averse investors.
Author: Ando Sakai Publisher: International Monetary Fund ISBN: Category : Business & Economics Languages : en Pages : 28
Book Description
Financial markets will play a catalytic role in financing the adaptation and mitigation to climate change. Catastrophe and green bonds in the private sector have become the most prominent innovations in the field of sustainable finance in the last fifteen years. Yet, the issuances at the sovereign level have been relatively recent and not well documented in the literature. This Note discusses the benefits of issuing these instruments as well as practical implementation challenges impairing the scaling-up of these markets. The issuance of these instruments could provide an additional source of stable financing with more favorable market access conditions, mitigate the stress of climate risks on public finances and facilitate the transition to greener low-carbon economies. Emerging market and developing economies stand to benefit the most from these financial innovations.
Author: Aviad S. Welt Publisher: ISBN: Category : Languages : en Pages : 164
Book Description
Anthropogenic climate change is rapidly becoming one of the most pressing and troublesome sources for systemic risk in the global economy. The potential impacts on developed and especially developing economies necessitates the employment of cutting edge and specifically tailored financial solutions to transfer various climatic risks to those in the capital markets who could bear them most economically. In the wake of the recent financial meltdown, however, risk transferring financial technology faces increased skepticism and suspicion with respect to its capability to reduce systemic risks. Rather, financial engineering is blamed for increasing systemic risks, as evidenced by the contribution of collateralized debt obligations (CDOs) and credit default swaps (CDS) to the evolution of the subprime crisis and the collapse of major financial institutions. Given the structuring similarities between catastrophe bonds and CDOs on the one hand, and between Over-The-Counter (OTC) weather derivatives and CDS on the other, two main questions must urgently be addressed: (1) whether the root causes for the recent financial crisis also apply to and call into question climatic risk shifting technology, and (2) what inherent drawbacks, if any, in Cat bonds and OTC weather derivatives should be addressed in order to lower the likelihood of a “climate bubble.” Shedding light on these key questions will contribute to the debate surrounding the future regulatory landscape of risk shifting financial technology in general, and that of climatic risk transfer in particular.
Author: Leonardo Martinez-Diaz Publisher: U.S. Commodity Futures Trading Commission ISBN: 057874841X Category : Science Languages : en Pages : 196
Book Description
This publication serves as a roadmap for exploring and managing climate risk in the U.S. financial system. It is the first major climate publication by a U.S. financial regulator. The central message is that U.S. financial regulators must recognize that climate change poses serious emerging risks to the U.S. financial system, and they should move urgently and decisively to measure, understand, and address these risks. Achieving this goal calls for strengthening regulators’ capabilities, expertise, and data and tools to better monitor, analyze, and quantify climate risks. It calls for working closely with the private sector to ensure that financial institutions and market participants do the same. And it calls for policy and regulatory choices that are flexible, open-ended, and adaptable to new information about climate change and its risks, based on close and iterative dialogue with the private sector. At the same time, the financial community should not simply be reactive—it should provide solutions. Regulators should recognize that the financial system can itself be a catalyst for investments that accelerate economic resilience and the transition to a net-zero emissions economy. Financial innovations, in the form of new financial products, services, and technologies, can help the U.S. economy better manage climate risk and help channel more capital into technologies essential for the transition. https://doi.org/10.5281/zenodo.5247742
Author: J. David Cummins Publisher: World Bank Publications ISBN: 0821377361 Category : Political Science Languages : en Pages : 299
Book Description
'Catastrophe Risk Financing in Developing Countries' provides a detailed analysis of the imperfections and inefficiencies that impede the emergence of competitive catastrophe risk markets in developing countries. The book demonstrates how donors and international financial institutions can assist governments in middle- and low-income countries in promoting effective and affordable catastrophe risk financing solutions. The authors present guiding principles on how and when governments, with assistance from donors and international financial institutions, should intervene in catastrophe insurance markets. They also identify key activities to be undertaken by donors and institutions that would allow middle- and low-income countries to develop competitive and cost-effective catastrophe risk financing strategies at both the macro (government) and micro (household) levels. These principles and activities are expected to inform good practices and ensure desirable results in catastrophe insurance projects. 'Catastrophe Risk Financing in Developing Countries' offers valuable advice and guidelines to policy makers and insurance practitioners involved in the development of catastrophe insurance programs in developing countries.
Author: Leigh Taylor Johnson Publisher: ISBN: Category : Languages : en Pages : 256
Book Description
The planet's changing climatology poses epistemological and practical problems for insurance institutions underwriting weather or property risks: models based on meticulously calculated empirical event frequencies will not project risk in a changing climate system. Seeking to explain the unprecedented scale of recent insured losses, media pieces regularly articulate a narrative that links climate change to an immanently insecure future. This logic has prompted some scholars to place climate change in a new category of risks generated by industrial society that are fundamentally incalculable and uninsurable. This dissertation challenges the epistemological assumptions and empirical validity of the "uninsurability hypothesis" using the case study of (re)insurance and catastrophe modeling for North Atlantic tropical cyclones. In so doing, it turns a critical eye on the depoliticized discourse of climate change emergency. The research analyzes the development of insurance institutions and definitions of climate change risk over time, applying the theory that risks are reconstructed phenomenon of multiple contingency which always embody contested classificatory and causal stories. Research included over forty extended interviews with academic, regulatory, and private sector employees; observation at thirteen industry, academic, and regulatory conferences; and qualitative and quantitative analysis of corporate and regulatory documents and datasets. The findings trace new constellations of science, value, and fear that are emerging within the (re)insurance industry as it attempts to assess and manage climate risks and secure new paths to accumulation. Three major themes emerge. First, the dynamics of climate change are being integrated into circuits of insurance and financial capital. The perception of climate risk may buoy the (re)industry's business prospects in the short term by reproducing uncertainty and allowing firms to exclude certain risks from all-perils coverage and repackage them into new products. Climate risks may be incorporated into the central contradictory dynamic of the catastrophe reinsurance market, which requires the continual recurrence of catastrophic losses and devaluation in order to sustain pricing and accumulation in the long term. Meanwhile, investment capital is accessing new risk premiums from the insurance sector through catastrophe bonds, the market for which demonstrates a strategic and selective attempt to capture "returns on place" by finance capital, rather than an "escape" from uninsurable places on the part of (re)insurers. Second, within both the industry and scientific community, the question of how climate change is influencing catastrophic losses or will do so in the future is far from settled, despite its representation as a closed "matter of fact". Furthermore, most (re)insurers do not currently account for climate change in their daily underwriting and pricing, and often cite the possibility of compensating for climate effects through future annual adjustments to prices and policies. This apparent contradiction between discourse and practice is the result of a complex set of institutional, political, and economic factors rather than a systematic attempt to deceive the public or exaggerate risks. Third, privatized economies of science - and particularly probabilistic catastrophe models - are central tools for climate risk management through (re)insurance markets. The expertise of PhD-credentialed scientists is increasingly used in industry contexts to publicize climate change risks, legitimate moves towards five-year forward-looking catastrophe models, and to commodify climate risks into financial exposures and assets. These findings draw our attention the (re)insurance industry's dependence on the perpetual multiplication of fear and value via technocientific risk identification, and suggest the profound limitations of attempts to manage climate risks and anxieties through market mechanisms.
Author: Stephane Hallegatte Publisher: World Bank Publications ISBN: 1464806748 Category : Business & Economics Languages : en Pages : 227
Book Description
Ending poverty and stabilizing climate change will be two unprecedented global achievements and two major steps toward sustainable development. But the two objectives cannot be considered in isolation: they need to be jointly tackled through an integrated strategy. This report brings together those two objectives and explores how they can more easily be achieved if considered together. It examines the potential impact of climate change and climate policies on poverty reduction. It also provides guidance on how to create a “win-win†? situation so that climate change policies contribute to poverty reduction and poverty-reduction policies contribute to climate change mitigation and resilience building. The key finding of the report is that climate change represents a significant obstacle to the sustained eradication of poverty, but future impacts on poverty are determined by policy choices: rapid, inclusive, and climate-informed development can prevent most short-term impacts whereas immediate pro-poor, emissions-reduction policies can drastically limit long-term ones.
Author: National Research Council Publisher: National Academies Press ISBN: 0309133041 Category : Science Languages : en Pages : 252
Book Description
The climate record for the past 100,000 years clearly indicates that the climate system has undergone periodic-and often extreme-shifts, sometimes in as little as a decade or less. The causes of abrupt climate changes have not been clearly established, but the triggering of events is likely to be the result of multiple natural processes. Abrupt climate changes of the magnitude seen in the past would have far-reaching implications for human society and ecosystems, including major impacts on energy consumption and water supply demands. Could such a change happen again? Are human activities exacerbating the likelihood of abrupt climate change? What are the potential societal consequences of such a change? Abrupt Climate Change: Inevitable Surprises looks at the current scientific evidence and theoretical understanding to describe what is currently known about abrupt climate change, including patterns and magnitudes, mechanisms, and probability of occurrence. It identifies critical knowledge gaps concerning the potential for future abrupt changes, including those aspects of change most important to society and economies, and outlines a research strategy to close those gaps. Based on the best and most current research available, this book surveys the history of climate change and makes a series of specific recommendations for the future.
Author: Reinhard Mechler Publisher: Springer ISBN: 3319720260 Category : Science Languages : en Pages : 557
Book Description
This book provides an authoritative insight on the Loss and Damage discourse by highlighting state-of-the-art research and policy linked to this discourse and articulating its multiple concepts, principles and methods. Written by leading researchers and practitioners, it identifies practical and evidence-based policy options to inform the discourse and climate negotiations. With climate-related risks on the rise and impacts being felt around the globe has come the recognition that climate mitigation and adaptation may not be enough to manage the effects from anthropogenic climate change. This recognition led to the creation of the Warsaw International Mechanism on Loss and Damage in 2013, a climate policy mechanism dedicated to dealing with climate-related effects in highly vulnerable countries that face severe constraints and limits to adaptation. Endorsed in 2015 by the Paris Agreement and effectively considered a third pillar of international climate policy, debate and research on Loss and Damage continues to gain enormous traction. Yet, concepts, methods and tools as well as directions for policy and implementation have remained contested and vague. Suitable for researchers, policy-advisors, practitioners and the interested public, the book furthermore: • discusses the political, legal, economic and institutional dimensions of the issue• highlights normative questions central to the discourse • provides a focus on climate risks and climate risk management. • presents salient case studies from around the world.
Author: Claudio Morana
Author: Claudio Morana
Author: Claudio Morana
Author: Ando Sakai
Author: Aviad S. Welt
Author: Leonardo Martinez-Diaz
Author: J. David Cummins
Author: Leigh Taylor Johnson
Author: Stephane Hallegatte
Author: National Research Council
Author: Reinhard Mechler