Catastrophe Bonds Securitization in Iran's Insurance Industry

Subject Areas : Journal of Investment Knowledge

Abdul Majid Dehghan ¹ (Assistant Professor and Faculty Member of Islamic Azad University, Yadgar Imam Khomeini (Ray), Shahrery (Corresponding author))
Alireza Fahimi ² (Ph.D. Student of Finance - Tehran University of Science Research)
Pooneh Farina ³ (Ph.D. Student of Finance - Tehran University of Science Research)

Received: 2017-08-17 Accepted : 2017-10-29 Published : 2018-09-23

Keywords: Insurance linked Securities, Insurance Securitization, Catastrophe Bond or Cat Bond,

Abstract :

The life of issuance of insurance linked securities (ILS) in the world has been around for decades. The most famous of these securities is Catastrophe Bond or CAT BOND which has been widely advertised by insurance companies and reinsurance companies over the past few decades. With a quick look at the history of these securities, we find that most of these securities have been published in disaster-prone countries, including the United States and Japan. In this research, while reviewing the conventional global models, the possibility of publishing these securities by insurance companies in Iran has been investigated. According to investigations carried out in Iran as an accident-prone country, we find that insurance companies and reinsurance companies because of their limited amount of capital to pay for their obligations and damages caused by natural disasters, can use this method to issue insurance linked securities (ILS). In this study, it has been shown that, in regard to good capacities of Iranian capital market and the active pillars in issuance of fixed income securities, as well as the need of insurance industry to reach new markets for financing and risk transferring, it is possible to design and issue Catastrophe Bond.  

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http://dx.doi.org/10.1016/j.amc.2017.03.041