2006 Hurricane Risk Case Study Essay
3. Investing in insurance products: what should Suzanne Feller do?
Answer: According to the case Suzanne Feller actually has 125 million of dollars. The decision to invest or not will depend only on her risk tolerance. In this case we have following situation:
1) Nominal return (annualized) on the investment will range from 13% to 26%. It will depend on the date of the payment. 2) Expected return will range from 15.84% to 25.74%. 3) There is only 1% probability that triggering event will happen. 4) In exhibit 3 we can assume that only hurricanes of 5th category can damage more than 20 billion dollars. 5) In exhibit 1 we see that for the period 1900 – 2004 only once there was only 2 5 category hurricane.
Under these conditions the best decision is to invest.
Another point is that Suzanne Feller has to diversify her portfolio. She has sold her business and she needs to safe her money for future. Under this circumstances decision will totally depend on her risk tolerance. For conservative scenario she can invest only 10% of her funds. For aggressive 50% or more.
4. How large is property and casualty insurance market in Kazakhstan? Who are main players in this market?
Answer: First insurance companies founded in Kazakhstan in 1990. Their organizational structures were developed from co-operatives and associations to joint stock companies. Now there are 41 insurance and reinsurance organizations currently