| CODE | INS4040 | ||||||
| TITLE | Alternative Risk Transfer | ||||||
| UM LEVEL | 04 - Years 4, 5 in Modular UG or PG Cert Course | ||||||
| MQF LEVEL | Not Applicable | ||||||
| ECTS CREDITS | 4 | ||||||
| DEPARTMENT | Insurance | ||||||
| DESCRIPTION | Traditional re/insurance uses a re/insurance contract to transfer various property and/or casualty risks from the policyholder to a re/insurance company. Over recent decades a number of techniques, generally referred to under the heading of Alternative Risk Transfer (ART), have been developed to finance and/or transfer risks held by companies or re/insurance companies using a variety of techniques other than traditional insurance contracts. This study-unit provides an introduction to the main ART techniques that are currently in use. Study-unit Aims: This study-unit aims to provide an appreciation of: - why the various ART techniques have been developed; - what their key features are, their contractual structures, how they differ from traditional insurance and who the counterparties are; - the situations in which they can be used; - the advantages and disadvantages to the counterparties involved; - and the current trends in ART development. Almost all of the ART structures considered will be introduced and/or illustrated with real-life deals. Learning Outcomes: 1. Knowledge & Understanding: By the end of the study-unit the student will be able to: - understand why and how techniques other than traditional insurance and reinsurance have been developed to provide risk financing and transfer for corporations and re/insurance companies; - describe the principal types of Alternative Risk Transfer (ART) structures, their strengths and weaknesses, and areas of application. 2. Skills: By the end of the study-unit the student will be able to apply this ART produce knowledge and understanding to real-life situations. Main Text/s and any supplementary readings: - "The picture of ART" by Swiss Re, sigma no. 1, 2003 – available on www.swissre.com under Research and Publications, sigma insurance research, sigma archive. - Alternative risk transfer via finite risk reinsurance: an effective contribution to the stability of the insurance industry by Swiss Re, sigma no. 5, 1997 – no longer available on www.swissre.com, lecturer will supply - Insurance of the future – CatEPutSM by Bryon Ehrhart and Alan Punter in The Treasurer, July/August 1997 - Just-in-Case Capital by Russ Banham in CFO Magazine, June 2001 – available at www.cfo.com/article.cfm/2996186/c_2984346/?f=archives - Capital market innovation in the insurance industry by Swiss Re, sigma no. 3, 2001 – available on www.swissre.com under Research and Publications, sigma insurance research, sigma archive - Securitization – new opportunities for insurers and investors by Swiss Re, sigma no. 7, 2006 – available on www.swissre.com under Research and Publications, sigma insurance research, sigma archive - Insurance-Linked Securities: Capital Revolution – ILS Market Expands to New Heights 2013 by Aon Benfield Securities– available on http://thoughtleadership.aonbenfield.com/Documents/20130830_ab_ils_annual_report_2013.pdf - A Balanced Discussion on Insurance-Linked Securities by PartnerRe, Research & Publications – available on www.partnerre.com/App_Assets/Public/d3aa0b47-b345-4a39-9002-116ba1f46fb7/ils.pdf - Of Sidecars and Such by Morton N Lane of Lane Financial, 31 January 2009 - available on www.LaneFinancialLLC.com under Publications (registration required) - The role of indices in transferring insurance risks to the capital markets by Swiss Re, sigma no. 4, 2009 – available on www.swissre.com under Research and Publications, sigma insurance research, sigma archive - Innovative financing: Life insurance securitisation by PricewaterhouseCoopers, November 2005 - available at www.pwc.com/en_GX/gx/actuarial-insurance-services/pdf/innovative-financing-life-insurance-securitisation.pdf - The Insurative Model by Prakash Shimpi in Risk Management, August 2001 - available at www.rmmag.com/Magazine/PDF/Insurative_Model.pdf Further reading - New solutions for the financing of risk by Alan Punter in Journal of Insurance Research & Practice (2000), Volume 15, part 2, pages 1 to 12 - Alternative risk transfer, CII Fact File International, Last updated May 2008 - Next generation captives: optimising opportunities by Marsh EMEA, Captive Solutions Practice (2008) – available (registration required) on www.marsh.co.uk/research/2008/captive_reports.php - The Uses and Abuses of Finite Risk Reinsurance by Christopher L Culp and J B Heaton in Journal of Applied Corporate Finance, Volume 17, Number 3, pages 18 to 31 (Summer 2005) - available on Competitive Enterprise Institute website www.cei.org/gencon/019,05198.cfm - Finite Reinsurance and Risk Transfer: Will Concern in the United States Shape the Global Debate? by Guy Carpenter, September 2005 – available on www.guycarp.com/portal/extranet/pdf/GCPub/Finite_RiskTransfer.pdf - Contingent Capital Arrangements Michael W Elliott in Risk Management Section Quarterly, Vol. 18, No. 2, pages 1 to 2, September 2001, CPCU - available at http://riskmanagement.cpcusociety.org/file_depot/0-10000000/0-10000/8116/folder/20215/RMQsept.2001.pdf - Contingent Capital: Integrating Corporate Financing and Risk Management Decisions by Christopher L Culp in Journal of Applied Corporate Finance, Vol. 15, No. 1, Spring 2002 – available at http://rmcsinc.com/articles/JACF151.pdf Supplementary reference text books - The ART of Risk Management: Alternative Risk Transfer, Capital Structure, and the Convergence of Insurance and Capital Markets by Christopher L Culp, Wiley Finance (2002) – chapters 17 to 21, later part of chapter 22. - Structured Finance & Insurance: The ART of Managing Capital and Risk by Christopher L Culp, Wiley Finance (2006) – chapters 2, 7, 15, 22 to 25, and 34. - Alternative Risk Transfer: Integrated Risk Management Through Insurance, Reinsurance and the Capital Markets by Erik Banks, Wiley Finance (2004) – chapters 3, and 5 to 11. - Alternative Risk Strategies edited by Morton N Lane, Risk Books (2002) – chapters 1, 3, 4, 7, 8, 9, 19, 20 and 29. |
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| ADDITIONAL NOTES | Pre-requisite Study-unit: INS2010 (or INS4021) | ||||||
| STUDY-UNIT TYPE | Lecture | ||||||
| METHOD OF ASSESSMENT |
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| LECTURER/S | Denise Cachia Adam Karl Farrugia Deborah Schembri Mark Lawrence Mario Zammit |
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The University makes every effort to ensure that the published Courses Plans, Programmes of Study and Study-Unit information are complete and up-to-date at the time of publication. The University reserves the right to make changes in case errors are detected after publication.
The availability of optional units may be subject to timetabling constraints. Units not attracting a sufficient number of registrations may be withdrawn without notice. It should be noted that all the information in the description above applies to study-units available during the academic year 2025/6. It may be subject to change in subsequent years. |
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