Marsh & McLennan Securities, the specialized investment banking subsidiary, of the world’s largest insurance broker, has released “Issues in the Pricing of Catastrophic Risk,” a report which examines the “pricing of capital market instruments in catastrophic events.”
The principle author, Harvard Business School Professor Kenneth A. Froot, considers the appropriate level of pricing for both catastrophic events and weather risks, and “focuses on the ongoing debate surrounding the appropriate level of pricing.” The report finds that present high price levels are unjustified.
“Many argue that the prices for such risks should be relatively high, because of the uncertainty associated with the probabilities of such events,” said the report. “The authors contend, however, that such uncertainty does not justify the current high pricing of catastrophe-linked securities, and therefore suggest that the prices of these instruments can move lower.”
The report is available over the Internet at: http://www.guycarp.com, or by telephone at 212 323 1344.
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