The ability of insurance and reinsurance industries to manage a catastrophic event has been called into question by experts . Unprecedented events with a low - frequency probability but extremely high loss potential can cripple firms and economies , and while the likelihood of such an event is low , Risk Management Solutions CEO , Hemant Shah suggests insurance and insurance companies should be paying more attention to losses of this nature than they currently appear to be . With events such as these in mind , Shah suggests the insurers and reinsurers should consider the use of insurance - linked security ( ILS ) or catastrophe bond protection to achieve cost - effective cover ; precisely why the catastrophe bond protection was created 20 years ago .
The ability of insurance and reinsurance industries to manage a tail event has been called into question by experts. Unprecedented events with a low-frequency probability but extremely high loss potential can cripple firms and economies, and while the likelihood of such an event is low, Risk Management Solutions CEO, Hemant Shah suggests insurance and reinsurance companies should be paying more attention to losses of this nature than they currently appear to be. With events such as these in mind, Shah suggests the insurers and reinsurers should consider the use of insurance-linked securities (ILS) or catastrophe bond protection to achieve cost-effective cover; precisely why the catastrophe bond market was created 20 years ago.