What are insurance derivatives?
Summary derivatives are products that investors can buy on the market. They have payment flows based on the characteristics of the insurance market. These derivatives, traded from Chicago Trade, introduced them in 1992, giving investors more opportunities to add to their portfolio and provide insurance companies greater flexibility in the types of politicians they can write.
cash contracts give individuals a way to share the risk. People who are worried about experiencing an event pay an amount called a bonus. The company combines funds and there is demands from this fund. Any person who buys insurance trades with the possibility that he will have to make a large payment for the certainty of making a premium payment. Theoretically, people should accept insurance contracts only if their premium equals their risk that there will be an ambiguous event during the premium period multiplied by the costs incurred if the event occurred.
purposeThe insurance contracts are to protect people from unwanted risks, so the buyer must have compensation. This means that if an event occurs, the policyholder must be directly affected; For example, you could not remove the flood insurance in your neighbor's house, because you would not be responsible for paying for repairs if the flood damage to the house.
insurance derivatives are not limited to compensated parties. They allow any investor to buy products based on market insurance. Investors who buy insurance derivatives are often speculators. This means that they are trying to guess future events and invest accordingly. These products also allow investors to add a new market sector to their portfolios to diversify their investments.
Some insurance companies also participate in the insurance market. Not all levels of risk are the same insurance withPolečnosty recognizes it. Generally, people who can get traditional insurance are a low risk of insured events. This leaves a group of high -risk people who want insurance but cannot buy it, and the providers of the invited revival provide insurance to this group. They take the added risk as they can invest in insurance derivatives to reduce their risk.
For trade, a number of insurance derivatives are available. Are not based on real politicians; Rather, their payments are determined by the level of insurance statistics. The weather derivatives depend on the specified weather events. Cats derivatives make payments based on whether there is a certain disaster. There are also derivatives that receive their value from the statistics of segments of the traditional insurance market.