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The Actuary The magazine of the Institute & Faculty of Actuaries
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Book review: The Handbook of Insurance-Linked Securities

The Handbook of Insurance-Linked Securities is a wide-ranging book covering a variety of aspects relating to insurance-linked securities. It has three sections, covering non-life securitisation, life securitisation and the various tax and regulatory issues. For the first two sections, overviews of the two types of security are given together with the views of securitisation from both the cedant and investor perspectives. There are also class-specific discussions, such as portfolio monitoring for non-life securitisation and longevity indices for life securitisation.

What is not included is any significant information on how to model the underlying life and non-life risks. This is not necessarily a failing of the book — since such modelling is too important to skate over in a chapter or two — but anyone interested in the modelling aspects should buy a book devoted solely to that topic.

Even excluding the modelling aspects, the range of material covered is broad. To produce such variety the editors use the skills of a number of authors. While this leads to a wide range of viewpoints and a breadth of expertise, it occasionally makes the book appear a little fragmented. For example, when three parts of a single chapter are authored by three different individuals, it is difficult to combine the parts into a coherent piece of work. This can leave the impression that some aspects have been overlooked, even if it is not clear which aspects those are.

The choice of authors also has advantages and disadvantages. Choosing a range of practitioners means that the book is firmly focused on how these markets work in the real world rather than how they should work in theory. This is definitely a good thing. However, some of the contributors from industry seem to feel obliged to sing the praises of their employers’ skills rather than giving an objective assessment of a particular area, which can reduce the credibility of the information given in their chapters.

The practitioner-based source of information also means that many of the chapters are case studies. Some of these are titled as such, while others use case studies to illustrate particular approaches. This is very helpful as a way of showing exactly how these securities can be constructed and used in practice. However, a drawback of case studies is that they are specific rather than general — the only points that can be illustrated are those relevant to the case study in question. Some more information on ‘points to consider’ would have been helpful.

The book does, then, have a number of flaws. However, this handbook does give information on insurance-linked securities that is simply not available anywhere else in a single volume or in as much depth.

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Paul Sweeting is professor of actuarial science at the University of Kent