A Cat Bond Premium Puzzle?

Catastrophe Bonds whose payoffs are tied to the occurrence of natural disasters offer insurers the ability to hedge event risk through the capital markets that could otherwise leave them insolvent if concentrated solely on their own balance sheets. At the same time, they offer investors a unique opportunity to enhance their portfolios with an asset that provides an attractive return that is uncorrelated with typical financial securities Despite its attractiveness, spreads in this market remain considerably higher than the spreads for comparable speculative grade debt. This paper uses results from behavior economics to suggest why cat bonds have not been more attractive to the investment community at current prices. In particular, the authors suggest that "ambiguity aversion", "loss aversion", and "uncertainty avoidance" may account for the reluctance of investment managers to invest in these products. In addition, since Catastrophe Bonds are a new type of investment, investors must invest time and money up front in order to educate themselves about the legal and technical complexities of the Cat Bond market before that investor can make a "to-buy or not-to-buy" decision. Such a transaction cost may reduce the attractiveness of the new bonds to the point where the investor would prefer to stay out of the market. The bulk of the paper consists of quantitative assessments of each of these hypotheses, along with a demonstration that Cat Bonds are indeed much more attractive than high yield bonds in terms of their Sharpe ratios (the ratio of the "excess return" over the risk free rate to the standard deviation of returns on the bonds). This is accomplished by simulating potential losses for hypothetical Cat Bonds under a wide variety of hurricane scenarios for the Miami/Dade county are. These findings lead the authors to suggest that issuers of Cat Bonds could themselves take steps to lower the cost of placing risk in this manner. Specifically, issuers might standardize a simple structure of terms to decrease the investor's cost of education. In addition issuers could better quantify and reduce pricing uncertainty. These steps will should increase demand for these instruments and produce a concomitant reduction in price.

Five-year retrospective study on primary hyperparathyroidism in South India: Emerging roles of minimally invasive parathyroidectomy and preoperative localization with methionine positron emission tomography-computed tomography scan

Background: Primary hyperparathyroidism (PHPT) is a common endocrine disease with a variable clinical presentation. PHPT is usually symptomatic at presentation in majority of the patients, especially in developing countries. As the accessibility to investigations, advanced imaging methods and surgical procedures are improving, the clinical profile of the patients with PHPT has undergone a palpable change compared to the earlier description. Hence we decided to look for a change in clinical, imaging and surgical outcomes of PHPT patients from South India. Methods: We collected the data on clinical presentation, biochemistry, radiological features and operative findings of patients with PHPT treated in our hospital from 2011-2015. Cases of PHPT were identified from the laboratory values using the biochemical criteria, after the exclusion of secondary and tertiary hyperparathyroidism cases. Results: Our study identified 54 patients (19 males and 35 females) with age ranging from 16 to 71 years. A Significant proportion(38.9%) of the patients were asymptomatic. Musculoskeletal symptoms (40.7%), renal manifestations (27.7%) and gastrointestinal system involvement (27.7%) constituted the other common modes of presentation. CNS involvement was seen in 3 patients. A palpable nodule in the neck was detected in 4 patients. Interestingly 4 patients were managed for parathyroid crisis at presentation. Biochemical features included hypercalcaemia (100%) and hypophosphatemia (59%) with a mean intact PTH level of 602.0±721.3 pg/ml. Sensitivity of Ultrasonography and Tc99M Sestamibi was 72% and 70.6% respectively for detecting a parathyroid adenoma. Sensitivity of C11 methionine PET-CT was 71.4% in those patients who were negative for other imaging modalities. Forty three patients (79.6%) underwent minimally invasive parathyroidectomy. Conclusion: In South India we have a notable change in the clinical presentation of PHPT from a symptomatic to an asymptomatic state. C11 Methionine PET - CT is an emerging modality for preoperative localisation especially when other imaging modalities are negative and when a minimally invasive parathyroidectomy is desired

Why have exchange-traded catastrophe instruments failed to displace reinsurance?

In spite of the fact that they can draw on a larger, more liquid and more diversiedpool of capital than the equity of reinsurance companies, nancial markets have failedto displace reinsurance as the primary risk-sharing vehicle for natural catastropherisk. We show that this failure can be explained by dierences in information gatheringincentives between nancial markets and reinsurance companies. Using a simple modelof an insurance company that seeks to transfer a fraction of its risk exposure eitherthrough nancial markets or through traditional reinsurance, we nd that the supplyof information by informed traders in nancial markets may be excessive relative to itsvalue for the insurance company, causing reinsurance to be preferred. We show thatwhether traditional reinsurance or nancial markets are ultimately selected dependscrucially on the information acquisition cost structure and on the degree of redundancyin the information produced. Limits on the ability of informed traders to protablytake advantage of their information make the use of nancial markets more likely