Structured Finance and Insurance: The ART of Managing Capital and Risk
"More and more each year, the modern corporation must decide what risks to keep and what risks to shed to remain competitive and to maximize its value for the capital employed. Culp explains the theory and practice of risk transfer through either balance sheet mechanism such as structured finance, derivative transactions, or insurance. Equity is expensive and risk transfer is expensive. As understanding grows, and, as a result, costs continue to fall, ART will continue to replace equity as the means to cushion knowable risks. This book enhances our understanding of ART."
--Myron S. Scholes, Frank E. Buck Professor of Finance, Emeritus, Graduate School of Business, Stanford University
"A must-read for everyone offering structured finance as a business, and arguably even more valuable to any one expected to pay for such service."
--Norbert Johanning, Managing Director, DaimlerChrysler Financial Services
"Culp's latest book provides a comprehensive account of the most important financing and risk management innovations in both insurance and capital markets. And it does so by fitting these innovative solutions and products into a single, unified theory of financial markets that integrates the once largely separate disciplines of insurance and risk management with the current theory and practice of corporate finance."
--Don Chew, Editor, Journal of Applied Corporate Finance (a Morgan Stanley publication)
"This exciting book is a comprehensive read on alternative insurance solutions available to corporations. It focuses on the real benefits, economical and practical, of alternatives such as captives, rent-a-captive, and mutuals. An excellent introduction to the very complex field of alternative risk transfer (ART)."
--Paul Wohrmann, PhD, Head of the Center of Excellence ART and member of theExecutive Management of Global Corporate in Europe, Zurich Financial Services
"Structured Finance and Insurance transcends Silos to reach the Enterprise Mountaintop. Culp superbly details integrated, captive, multiple triggers and capital market products, and provides the architectural blueprints for enterprise risk innovation."
--Paul Wagner, Director, Risk Management, AGL Resources Inc.
PART ONE: Integrated Risk and Capital Management.
Chapter 1: Real and Financial Capital.
Chapter 2: Risk and Risk Management.
Chapter 3: Leverage.
Chapter 4: Adverse Selection and Corporate Financing Decisions.
Chapter 5: Capital Budgeting, Project Selection, and Performance Evaluation.
Chapter 6: Risk Transfer.
Chapter 7: Risk Finance.
PART TWO: Traditional Risk Transfer.
Chapter 8: Insurance.
Chapter 9: Reinsurance.
Chapter 10: Credit Insurance and Financial Guaranties.
Chapter 11: Derivatives.
Chapter 12: Credit Derivatives and Credit-Linked Notes.
PART THREE: Structured Finance.
Chapter 13: The Structuring Process.
Chapter 14: Hybrids, Convertibles, and Structured Notes.
Chapter 15: Contingent Capital.
Chapter 16: Securitization.
Chapter 17: Cash Collateralized Debt Obligations.
Chapter 18: Synthetic Collateralized Debt Obligations.
Chapter 19: Structured Synthetic Hybrids.
Chapter 20: Securitizing Private Equity and Hedge Funds.
Chapter 21: Project and Principal Finance.
PART FOUR: Structured Insurance and Alternative Risk Transfer.
Chapter 22: Risk Securitizations and Insurance-Linked Notes.
Chapter 23: Captives, Protected Cells, and Mutuals.
Chapter 24: Finite Risk.
Chapter 25: Multiline and Multitrigger Insurance Structures.
Chapter 26: Contingent Cover.
PART FIVE: Case and Issue Studies.
Chapter 27: The Emerging Role of Patent Law in Risk Finance (J. B. Heaton, Bartlit Beck Herman Palenchar & Scott).
Chapter 28: Critical Distinctions between Weather Derivatives and Insurance (Andrea S. Kramer, McDermott Will & Emery).
Chapter 29: Is Insurance a Substitute for Capital under the Revised Basel Accord? (Barbara T. Kavanagh).
Chapter 30: Is My SPE a VIE under FIN46R, and, If So, So What? (J. Paul Forrester, Mayer Brown Rowe & Maw, and Benjamin S. Neuhausen, BDO Seidman).
Chapter 31: Credit Derivatives, Insurance, and CDOs: The Aftermath of Enron (Alton B. Harris, Ungaretti & Harris, and Andrea S. Kramer, McDermott Will & Emery).
Chapter 32: Project Finance Collateralized Debt Obligations: What? Why? Now? (J. Paul Forrester, Mayer Brown Rowe & Maw).
Chapter 33: 2004 Review of Trends in Insurance Securitization: Exploring Outside the Cat Box (Morton N. Lane and Roger Beckwith, Lane Financial).
Chapter 34: Enterprise Risk Management: The Case of United Grain Growers (Scott E. Harrington and Greg Niehaus, University of South Carolina, and Kenneth J. Risko, Willis Risk Solutions).
Chapter 35: Representations and Warranties Insurance and Other Insurance Products Designed to Facilitate Corporate Transactions (Theodore A. Boundas and Teri Lee Ferro, Boundas, Skarzynski, Walsh & Black).
Appendix A: Capital Structure Irrelevance.
Appendix B: Risk-Based Capital Regulations on Financial Institutions.
Appendix C: Risk Capital.
Commonly Used Abbreviations.