Securitizing Insurance Risks

Posted: 10 Jul 2000

See all articles by Tamar Frankel

Tamar Frankel

Boston University School of Law

Joseph LaPlume

Goulston & Storrs

Abstract

Innovations can consist of new lenses for viewing the state of the world. Securitizing risks is such an innovation. The process of securitization has been traditionally used as a method of converting illiquid financial assets into liquid marketable assets. In the process, functions are unbundled, and the risks of investors in these assets can be reduced by diversification and other means.

However, the same process of securitization can be used to transfer risks, whether represented by financial assets or attached to them. By this method risks can be stripped and transferred, creating a derivative security representing the amount and type of risk that investors in the markets are ready to underwrite (for a price). Until recently, risk transfer was considered the sole domain of institutional intermediaries, especially insurance companies. No longer. This function is becoming a joint domain of institutions and the markets.

JEL Classification: K2

Suggested Citation

Frankel, Tamar and LaPlume, Joseph, Securitizing Insurance Risks. Available at SSRN: https://ssrn.com/abstract=231130

Tamar Frankel (Contact Author)

Boston University School of Law ( email )

765 Commonwealth Avenue
1070G
Boston, MA 02215
United States
617-353-3773 (Phone)
617-353-3077 (Fax)

Joseph LaPlume

Goulston & Storrs ( email )

United States

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