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The authors set up a deposit insurance pricing model that treats forbearance as an option to delay the resolution of undercapitalized financial institutions and, subsequently, derive a closed‐form solution for the deposit insurance put. The put is decomposed into a capital component and a time component. They then evaluate how the critical policy parameters relate to the cost of deposit insurance, and examine how moral hazard behaviour and the accompanying risk‐taking behaviour affect deposit insurance premiums. Résumé Les auteurs de l'article qui suit mettent au point un modèle de fixation des prix de l'assurance‐dépôts qui considère l'abstention comme un moyen visant à reporter la résolution des institutions financières sous‐capitalisée. Ils en déduisent une solution analytique pour l'option de vente de l'assurance‐depôts. Cette dernière comprend une composante de capital et une composante temporelle. Les auteurs de l'article évaluent lafaçon dont les paramètres de politique critique sont reliés au coût de l'assurance‐dépôts. Ils examinent aussi la manière dont l'aléa de moralité et le comportement à risque qui l'accompagne influencent les primes d'assurance‐dépôts.

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PurposeCatastrophe (CAT) events associated with natural catastrophes and man-made disasters cause profound impacts on the insurance industry. This research thus reviews the impact of CAT risk on the insurance industry and how traditional reinsurance and securitized risk-transfer instruments are used for managing CAT risk.Design/methodology/approachThis research reviews the impact of CAT risk on the insurance industry and how traditional reinsurance and securitized risk-transfer instruments are used for managing CAT risk. Apart from many negative influences, CAT events can increase the net revenue of the insurance industry around CAT events and improve insurance demand over the post-CAT periods. The underwriting cycle of reinsurance causes inefficiencies in transferring CAT risks. Securitized risk-transfer instruments resolve some inefficiencies of the reinsurance market, but are subject to moral hazard, basis risk, credit risk, regulatory uncertainty, etc. The authors introduce some popular securitized solutions and use Merton's structural framework to demonstrate how to value these CAT-linked securities. The hybrid solutions by combining reinsurance with securitized CAT instruments are expected to offer promising applications for CAT risk management.FindingsThe authors introduce some popular securitized solutions and use Merton's structural framework to demonstrate how to value these CAT-linked securities. The hybrid solutions by combining reinsurance with securitized CAT instruments are expected to offer promising applications for CAT risk management.Originality/valueThis research reviews a broad array of impacts of CAT risks on the (re)insurance industry. CAT events challenge (re)insurance capacity and influence insurers' supply decisions and reconstruction costs in the aftermath of catastrophes. While losses from natural catastrophes are the primary threat to property–casualty insurers, the mortality risk posed by influenza pandemics is a leading CAT risk for life insurers. At the same time, natural catastrophes and man-made disasters cause distinct impacts on (re)insures. Man-made disasters can increase the correlation between insurance stocks and the overall market, and natural catastrophes reduce the above correlation. It should be noted that huge CAT losses can also improve (re)insurance demand during the postevent period and thus bring long-term effects to the (re)insurance industry.