Insurance Risk Reinsurance through Cat Bonds Issuance: Key Drivers of Price Determination

This thesis explores the key factors that influence the price determination of catastrophe bonds, also known as CAT bonds. In the last few decades catastrophic bonds have become an increasingly popular alternative capital vehicle. Catastrophic bonds attract a lot of new investors as they offer high returns and have low correlation with financial markets. And it is quite popular among insurance and reinsurance companies and some state bodies since this financial instruments offer lower financial costs and provide more flexible insurance terms compared to traditional reinsurance market. In this study, we investigated the impact of several factors on the premium for catastrophic bonds. These factors included the expected loss, average amount of insurance contracts, share of premiums transferred to reinsurance, maturity of the insurer, change in insurer rating, and index of capital market profitability IMOEX. The regression analysis confirmed that the expected loss, insurer maturity and the IMOEX index have a significant impact on the premium, while other factors were found to be insignificant.