Case | HBS Case Collection | 2007 (Revised from original 2006 version)

Nephila: Innovation in Catastrophe Risk Insurance

by Kenneth A. Froot and Michael Heinrich

Abstract

At the cross-section of capital markets and the catastrophe insurance space stands the hedge fund Nephila. Nephila must decide how best to take advantage of the newly presented market opportunities post hurricanes Katrina, Wilma, and Rita. Nephila has a plethora of options as it brings capital markets understanding to the insurance space. Nephila can easily trade in and out of insurance products and is not subject to regulatory restrictions. Yet, Nephila only capitalizes 1% of the entire catastrophe reinsurance market. What is the best way to grow?

Keywords: hedge fund; investment management; uncertainty; Capital Markets; Insurance; Risk Management; Natural Disasters; Corporate Strategy; Investment; Innovation Strategy; Financial Services Industry; Insurance Industry; Bermuda;

Citation:

Froot, Kenneth A., and Michael Heinrich. "Nephila: Innovation in Catastrophe Risk Insurance." Harvard Business School Case 206-130, April 2007. (Revised from original June 2006 version.)