Data-intensive analytics for cat bonds by considering supply chain risks

Abstract

Catastrophe (cat) bonds are securities that transfer catastrophic risks to capital markets. From a macroscopic perspective, cat bonds provide a way to extend insurance capacities in catastrophic environments. Financial flows are the focus of most cat bond related articles. This paper will focus on information flows. The first contribution of this paper is to provide an extended cat bond structure and analyze catastrophic risk from a systematic perspective. Policyholders of catastrophe insurances are classified into different categories according to their roles in supply chains and analyzed distinguishingly. Due to uncertainties of natural catastrophes and the diversification of policyholders, data-intensive analysis is not only required for setting and calibrating cat bond policy values, but also required for providing decision support for investors and potential policyholders. The second contribution of this paper is to propose an idea of utilizing a data-intensive analysis platform to provide decision support for all participants of the cat bond structure, including investors, potential policyholders, the insurer and reinsurer. Furthermore, we identify more factors that will impact the price of a cat bond and catastrophe insurance.