The Use of Catastrophe Bonds as a Means of Economic Development in Emerging Economies

Author

Lauren MattucciFollow

Date of Award

Fall 2016

Project Type

Senior Honors Thesis

College or School

PAUL

Department

Economics

Program or Major

Economics (Honors in Major)

Degree Name

Bachelor of Science

First Advisor

Deniz Ozabaci

Abstract

Catastrophe bonds offer a way for entities located in natural disaster prone regions to safely and efficiently transfer the risk of insuring property to the financial markets and subsequently, create a financially attractive environment for insurers and investors. The opportunity for investors to utilize modeled loss analytical platforms such as those created by AIR, Risk Management Solutions, and EQECAT, could be used to bridge the growing gap in emerging economies between economic losses created by natural disasters and insured losses. Bridging this insurance gap in emerging economies could have positive global implications for the insurance industry, global trade, foreign direct investment, and the average humanitarian aid spent on natural disaster recovery and resistance. Apart from the additional profits that could be generated from increased underwriting in emerging economies, introducing catastrophe and property insurance to emerging economies could create a road map for other emerging economies who are struggling to balance economic development with disaster financing. Experience from sovereigns which have experimented with this method of risk transfer, such as Haiti and Mexico offer a basis for understanding the advantages and difficulties associated with developing a country specific modeled loss analytical platform for measuring natural hazard risks.

Recommended Citation

Mattucci, Lauren, "The Use of Catastrophe Bonds as a Means of Economic Development in Emerging Economies" (2016). Honors Theses and Capstones. 318.
https://scholars.unh.edu/honors/318