EFTA02621780.pdf

From: Vincenzo lozzo < Sent: Tuesday, September 18, 2018 7:14 PM To: [email protected] Subject: Insurance idea Hi Jeffrey, I've been looking more into the cyberinsurance stuff and it seems to=me that there's an opportunity on the tail end of the risk. I spoke to a bunch of brokers and reinsurers and every player in the market i= very concerned about catastrophic scenarios (Eg: the whole Amazon cloud is=brought down by an attack) but because there isn't enough data and n=body really trust the models it's very hard for say SwissRE to hedg= that risk. So the idea here is to offer cyber-cat bonds on specific catastrophic scenar=os that have an hedging strategy available in the capital markets (Eg: you c=n buy deeply out of money puts). So the basic math ends up being: Say you offer $100m of coverage with a 8% coupon for an amazon cloud outage t=at causes at least $5bn in aggregated losses, the principal has to be fully=collateralized but you can still buy treasuries with it. So if nothing happ=ns, you make 8% spread on treasuries. If the catastrophe does happen then you need to have a pool of capital you c=n use to short the company. Let's set aside options for a second an= let's say that you just short amazon, if you assume that the event=is catastrophic enough such that the share price goes down 10% you have to d=ploy about $330m (assuming the retail 3:1level) to fully cover your loss in prin=ipal on the cat bond side. It's a bit more complicated than this because you want to use some t=ch to decide when to actually buy the options and how to do some amount of p=rtfolio construction but the gist of it is the above. I spoke with Aon and they think that it is possible a cat bond of that kind w=uld sell, the big issue here is that the capital required is pretty high. = What do you think? Or more precisely, do you think it would be possible to r=ise capital for something like this? Thanks, Vincenzo Sent from my (phone <?xml version=.0" encoding=TF-8"?> <!DOCTYPE plist PUBLIC "-//Apple//DTD PLIST 1.0//EN" "http://www.apple.com/DTDs/PropertyList-1.0.dtd"> <plist version=.0"> <dict> <key>conversation-id</key> <integer>327765</integer> <key>date-last-viewed</key> <integer>0</integer> <key>date-received</key> <integer>1537298031</integer> EFTA_R1_01828908 EFTA02621780  <key>flags</key> <integer>8590195713</integen <key>remote-id</key> <string>854481</string> </dict> </plist> 2 EFTA_R1_01828909 EFTA02621781