Chart: Price Comparison - Traditional Reinsurance vs. Catastrophe Bonds

For placement where the expected LOL is less than 1 percent, capital market solutions are most attractive, as most reinsurers will charge minimum ROLs while capital markets can diversify. LOLs between 1 percent and 7 percent suggest convergence. The diagram shows a number of instances where catastrophe bonds are priced below traditional reinsurance. For LOLs higher than 7 percent, traditional markets dominate, due to the higher underwriting sophistication and knowledge required. To download this chart, right-click on the image, and select "Save Picture As". If you have any trouble, please e-mail us.