In an era of increasing climate volatility and complex risk landscapes, the traditional insurance and reinsurance markets are being transformed by innovative financial instruments. Insurance-Linked Securities (ILS), particularly catastrophe bonds, are at the forefront of this evolution, allowing insurers and corporations to transfer significant risk to the capital markets. This mechanism not only provides a powerful way to manage large-scale catastrophic exposures—such as those from hurricanes, earthquakes, and floods—but also offers institutional investors a high-yield, diversifying asset class with returns that are uncorrelated to traditional financial markets. This training course provides a critical and timely exploration of this dynamic and rapidly growing sector.

This comprehensive 10-day program is designed to guide participants through the entire lifecycle of an ILS transaction, from structuring and pricing to trading and post-issuance management. You will gain a deep understanding of the mechanics of various ILS products, the methodologies for modeling and quantifying catastrophic risk, and the regulatory and legal frameworks that govern this specialized market. Through practical case studies and expert-led discussions, this course will equip you with the essential skills to originate, analyze, and manage ILS, positioning you to capitalize on the opportunities presented by this sophisticated and high-stakes corner of the financial world.

Duration

10 days

Target Audience

• Reinsurance and insurance professionals
• Structured finance and capital markets specialists
• Institutional investors and asset managers
• Risk managers and actuaries
• Credit analysts and rating agency analysts
• Legal and compliance professionals
• Regulators and policymakers
• Corporate finance executives

Objectives

• Define and differentiate between various types of Insurance-Linked Securities (ILS).
• Understand the key motivations for issuers and investors in the ILS market.
• Structure and price a catastrophe bond from start to finish.
• Grasp the role of actuarial science and risk modeling in the ILS market.
• Navigate the legal and regulatory landscape of ILS transactions.
• Analyze the risk and return characteristics of cat bonds.
• Evaluate the role of third-party vendors and model providers.
• Explore emerging trends, including parametric triggers and ESG integration.
• Understand the post-issuance management and reporting requirements.

Course Modules

Module 1: Introduction to Risk Transfer and ILS

• The role of insurance and reinsurance in modern economies.
• The evolution of risk transfer from traditional to capital markets.
• A conceptual overview of Insurance-Linked Securities (ILS).
• The primary types of ILS, including catastrophe bonds and sidecars.
• The key motivations for issuers (sponsors) and investors.

Module 2: The Mechanics of Catastrophe Bonds

• The structure of a typical cat bond transaction.
• The role of the Special Purpose Vehicle (SPV) and collateral.
• How a trigger mechanism works (indemnity, modeled loss, parametric).
• The different tranches of a cat bond deal.
• Understanding the role of a paying agent and calculation agent.

Module 3: Pricing and Valuation of ILS

• The core principles of pricing catastrophic risk.
• An introduction to catastrophe modeling and its components.
• The key metrics used in ILS pricing, such as expected loss and risk premium.
• The impact of trigger type and attachment point on pricing.
• The role of mark-to-market valuations in the secondary market.

Module 4: Risk Modeling and Actuarial Science

• An in-depth look at the science behind catastrophe models.
• The key components of a cat model (hazard, exposure, vulnerability).
• The importance of model uncertainty and sensitivity analysis.
• The role of actuaries in validating and interpreting model outputs.
• The use of third-party modeling firms like RMS, AIR, and EQECAT.

Module 5: Legal and Regulatory Framework

• The legal documents for an ILS transaction, including the offering memorandum.
• The regulatory environment for SPVs and securities issuance.
• The importance of tax and accounting considerations.
• The role of legal counsel in structuring and executing a deal.
• The regulatory frameworks in key domiciles like Bermuda and Cayman Islands.

Module 6: Underwriting and Due Diligence

• The process of assessing the underlying risks in a portfolio.
• The due diligence process for a cat bond transaction.
• Verifying the accuracy of exposure data and historical losses.
• The role of independent third-party risk analysis.
• Understanding the sponsor's motivations and risk management strategy.

Module 7: Credit Rating and Investor Analysis

• The role of credit rating agencies in the ILS market.
• The criteria used to rate catastrophe bonds.
• How investors analyze the risk and return of an ILS deal.
• The importance of transaction transparency and reporting.
• The role of ILS indices and benchmarks.

Module 8: Parametric and Trigger-Based Transactions

• A deep dive into the mechanics of a parametric trigger.
• The benefits and drawbacks of using parametric triggers.
• The use of index-based triggers and their variations.
• Case studies of parametric transactions in different peril zones.
• The development of new and innovative triggers.

Module 9: Trading and Secondary Market

• An overview of the ILS secondary market.
• The factors that influence ILS prices after issuance.
• The role of brokers and trading platforms.
• Understanding the impact of a loss event on secondary market pricing.
• The use of ILS in portfolio management and risk hedging.

Module 10: Other Forms of ILS

• Exploring other ILS products beyond cat bonds.
• The structure and use of collateralized reinsurance sidecars.
• An overview of industry loss warranties (ILWs).
• Understanding contingent capital and other risk transfer solutions.
• The potential for securitizing non-catastrophic risks.

Module 11: Hedging and Risk Management

• The use of ILS by sponsors to manage their risk exposures.
• Integrating ILS into an overall reinsurance and capital management strategy.
• The benefits of multi-year and multi-peril transactions.
• The importance of basis risk and its mitigation.
• Using ILS to protect against extreme, tail-end events.

Module 12: Emerging Trends and ESG Integration

• The growing importance of ESG factors in the ILS market.
• The development of "green" and "blue" catastrophe bonds.
• The use of ILS for climate resilience and sustainable development.
• The role of technology, including blockchain and AI, in ILS.
• The future of ILS as an asset class.

Module 13: Investor Perspective and Portfolio Construction

• The role of ILS in a diversified investment portfolio.
• The benefits of non-correlated returns.
• How to source and evaluate ILS investment opportunities.
• The different ways to invest in ILS (e.g., funds, direct).
• Understanding the risks and rewards from an investor's perspective.

Module 14: Case Studies in ILS Transactions

• A detailed analysis of successful ILS deals.
• A deep dive into the deal structure, pricing, and performance.
• Lessons learned from historical cat bond triggers and payouts.
• An examination of both indemnity and parametric transactions.
• A discussion on the impact of these transactions on the market.

Training Approach

This course will be delivered by our skilled trainers who have vast knowledge and experience as expert professionals in the fields. The course is taught in English and through a mix of theory, practical activities, group discussion and case studies. Course manuals and additional training materials will be provided to the participants upon completion of the training.

Tailor-Made Course

This course can also be tailor-made to meet organization requirement. For further inquiries, please contact us on: Email: info@skillsforafrica.org, training@skillsforafrica.org  Tel: +254 702 249 449

Training Venue

The training will be held at our Skills for Africa Training Institute Training Centre. We also offer training for a group at requested location all over the world. The course fee covers the course tuition, training materials, two break refreshments, and buffet lunch.

Visa application, travel expenses, airport transfers, dinners, accommodation, insurance, and other personal expenses are catered by the participant

Certification

Participants will be issued with Skills for Africa Training Institute certificate upon completion of this course.

Airport Pickup and Accommodation

Airport pickup and accommodation is arranged upon request. For booking contact our Training Coordinator through Email: info@skillsforafrica.org, training@skillsforafrica.org  Tel: +254 702 249 449

Terms of Payment: Unless otherwise agreed between the two parties’ payment of the course fee should be done 7 working days before commencement of the training.