Offering Catastrophic Risk Management Framework by Alternative Risk Transfer Instruments to Islamic Capital Market with Cat Takaful (CT) Sukuk

Out of ۶۴ possible catastrophic events in the whole world, about ۳۴ of them have been experienced in Iran; more than ۸۰% of the regions are exposed to natural disasters risks such as earthquakes exposure. Domestic insurance capacity does not cover this volume of risk and the need for external reinsurance capacity is always felt. Catastrophe bonds structure as a financial & insurance innovative solution (Alternative Risk Transfer Instruments) allows an issuing institution to transfer catastrophic exposures and risk to capital market's investors by creating capital relief and additional risk capacity for our insurance industry. We adjusted the formal cat bonds structure with the Islamic jurisprudence. According to the systematic review research method ۸ steps, the Sukuk model was implemented based on the extracted concepts from ۲۳ Farsi articles and ۵۰ English articles. After that interviews by ۱۸ experts who were selected by purposive & Snowball sampling, The Delphi method was used to obtain the opinion of experts and their opinion was modified and implemented in the final model. In the open coding stage, ۴۱۵ concepts were extracted which were classified into ۱۰ categories and finally presented in ۴ Propositions/themes. The trustworthiness and authenticity did base on the four-stage model of Lincoln and Guba and also its complementary step. We finally suggested that the catastrophe bond instrument could be issued in the form of a cat takaful (CT) sukuk contract template, as a solution for transferring catastrophic risks to the Islamic financial market.

Keywords:

Takaful , insurance risk securitization , catastrophe bond , insurance Sukuk , catastrophe risk