SECURITIZATION AS AN ALTERNATIVE WAY OF MANAGING THE RISK OF CATASTROPHIC EVENTS

Faculty of Business Economics Bijeljina, Republic of Srpska, Bosnia and Herzegovina
Bosnia and Herzegovina


Abstract

Catastrophic events caused by natural disasters and human activities pose a unique challenge for insurers, because they make it difficult to estimate expected claims and can cause disruption to the insurance market and impose significant costs on government, businesses and individuals. The lack of available coverage of these risks in the market, due to the insolvency or unwillingness of insurers to ensure catastrophic events, can significantly impede the economic recovery and development of the country. For this reason insurers have sought alternative ways of covering these extreme losses, and one of them, a transfer of the risk of insurance to the capital markets represents the main subject of this research. The aim of this maneuver is to present the advantages and disadvantages of the instruments through which the transfer of insurance risk to financial markets is carried out, as well as to indicate the legal and other assumptions necessary for the functioning and development of this market.

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