University of Technology SydneyHandbook 2008

25717 Insurance Risk Financing

Faculty of Business: Finance and Economics
Credit points: 6 cp

Subject level: Postgraduate

Result Type: Grade and marks

Handbook description

This subject develops an understanding of contemporary risk financing techniques available to both insurers and insureds. It directs attention to the extent to which these alternative risk-financing techniques are structuring ongoing insurance relationships.

Subject objectives/outcomes

On successful completion of this subject, students should be able to:

  1. Understand the use of alternative risk financing techniques by both Insurer and Insured.
  2. Analyse the technical and theoretical issues involved in these processes.
  3. Understand the extent to which these alternative risk-financing strategies are structuring contemporary perceptions of risk and insurance.

Contribution to graduate profile

This 6-credit-point postgraduate subject introduces students to the contemporary issues arising from the use of alternative risk financing techniques by both Insureds and Insurers. Students will be provided with an understanding of the extent to which the use of alternative risk financing opportunities is structuring the future direction of the insurance process.

Emphasis is upon the use of alternative risk financing strategies for not only those natural perils that are commonly regarded as being commercially insurable risks, but also those existing and emerging risk exposures for which commercial insurance may be neither available nor viable in the longer term without major changes occurring in the insurance arena.

Content

  • Emerging alternative risk financing strategies.
  • Convergence of the insurance industry and capital markets.
  • Rating, indices and catastrophe models.
  • Securitisation, operational, legal and tax treatment of securitisation.
  • Insurance and weather derivatives, scope, application and modeling – Chaos Theory.

Assessment

Class Test (Individual)25%
The class test is designed to assess students' understanding of the theories and concepts to demonstrate that students have met objective 1.
Assignment and Case Study (Individual)25%
This will assess students' understanding of the concepts of risk financing in a practical case study. This assignment will allow students to demonstrate that they have met objective 2.
Final Exam (Individual)50%
This exam will test students' understanding of the theory and their ability to apply the theory. This will enable students to demonstrate that they have met objectives 1-3.

Recommended text(s)

Alexander, C., (1996) The Handbook of Risk Management and Analysis, Wiley, New York.

Indicative references

Alexander, C, (1998) Risk Management and Analysis, Markets and Products, Wiley, New York

Monti, R.G. et al (1995) A practical guide to finite risk insurance and reinsurance, Wiley, New York

Head, G, (1995) Essentials of risk financing, Insurance Institute of America, Malvern PA

Smithson, C.W.et al (1995) Managing Financial Risk: A guide to derivative products

Financial engineering and value maximisation, Irwin, Chicago.