Managing Climate Change Risk Through CAT Bonds : Global Perspectives and Implications for Indian Re/Insurers

Abstract

This study is focused on managing climate change risk through the use of catastrophe bonds as alternate risk transfer mechanism which allows insurers to
spread their risks through capital markets and financial instruments rather than reinsurance market. In the last 20 years India has endured several natural
catastrophes which were categorized as the direct result of climate change. Such events have immense impact on human life, economy of the country and the
insurance industry as well as reinsurers’ balance sheets. In this paper we explore the feasibility of catastrophe bonds and swaps as alternatives to risk transfer
mechanism. It also attempts to analyze the need for alternate risk management mechanisms.