Francesca Biagini

University of Munich (LMU)

Evaluating hybrid products: the interplay between financial and insurance markets

Abstract: A current issue in the theory and practice of insurance and reinsurance markets is to find alternative ways of securitizing risks. To this purpose, insurance companies have tried to take advantage of the vast potential of capital markets by introducing exchange-traded insurance-linked instruments such as mortality derivatives and catastrophe insurance options. At the same time, insurance products such as unit-linked life insurance contracts, where the insurance benefits depend on the price of some specific traded stocks, offer a combination of traditional life insurance and financial investment. Furthermore, new kinds of insurance instruments, which insure against risks, connected to macro-economic factors such as unemployment, are recently offered on the market.
In this lecture we will provide an introduction to how sophisticated mathematical methods for pricing and hedging financial claims can be can be applied to the valuation of the hybrid products mentioned above, as well as to premium determination, risk mitigation and claim reserve management.