Securitization of disability risk via bonds and swaps

Alexander Hendrik Maegebier (Department of Insurance Economics and Risk Management, Friedrich-Alexander University of Erlangen-Nürnberg (FAU), Nuremberg, Germany)

Journal of Risk Finance

ISSN: 1526-5943

Publication date: 17 August 2015

Abstract

Purpose

Two strands of the literature are combined, namely the modeling of disability insurance and the design, valuation and discussion of insurance-linked securities.

Design/methodology/approach

This paper provides a discussion regarding the advantages and detriments of disability-linked securities in comparison with mortality-linked bonds and swaps as well as regarding potential disability-linked indices and the potential use. The discussion is followed by an introduction of a potential design and a corresponding valuation of disability bonds and swaps.

Findings

This securitization will provide useful tools for the risk management of disability risk in a risk-based regulatory framework.

Originality/value

No disability-linked securities have been defined and discussed so far.

Keywords

Acknowledgements

The author would like to thank the anonymous reviewers for their suggestions on previous versions of the manuscript.

Citation

Maegebier, A.H. (2015), "Securitization of disability risk via bonds and swaps", Journal of Risk Finance, Vol. 16 No. 4, pp. 407-424. https://doi.org/10.1108/JRF-11-2014-0166

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Publisher

:

Emerald Group Publishing Limited

Copyright © 2015, Emerald Group Publishing Limited

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