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Capital market solutions to terrorism risk coverage: a feasibility study

SYLVIE BOURIAUX (Assistant Professor of Finance, Finance, Insurance & Law, Illinois State University, Normal, Illinois, USA. sbouria@ilstu.edu.)
WILLIAM L. SCOTT (Professor of Finance, Finance, Insurance & Law, Illinois State University, Normal, Illinois, USA. wlsott@ilstu.edu)

Journal of Risk Finance

ISSN: 1526-5943

Article publication date: 1 April 2004

Abstract

The US insurance industry has long faced the spectrum of large unexpected losses from natural catastrophes such as hurricanes and earthquakes. However, the September 11, 2001 terrorist attack clearly demonstrated a new form of catastrophic risk of man‐made origin. The damages in property and life are now well known as estimates of insured losses deriving from this event range from $40 to $54 billion. The 9/11 terrorist attacks renewed the capacity problem faced the insurance industry in the underwriting of large catastrophic risk. In that regard, this paper explores the feasibility of capital market alternatives to the conventional insurance mechanism, and analyses whether the capital market could provide extra capacity to absorb terrorism risk.

Citation

BOURIAUX, S. and SCOTT, W.L. (2004), "Capital market solutions to terrorism risk coverage: a feasibility study", Journal of Risk Finance, Vol. 5 No. 4, pp. 34-44. https://doi.org/10.1108/eb023012

Publisher

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Emerald Group Publishing Limited

Copyright © 2004, Emerald Group Publishing Limited