Page 47 - Banking Finance May 2023

ARTICLE

For investors, they offer the potential for high returns, The Future of Catastrophic Bonds
as the risk of loss is typically higher than other forms of
The future of catastrophic bonds looks bright. As the
fixed income securities.
frequency and severity of catastrophic events continue to
Catastrophic bonds can provide diversification benefits
increase, catastrophic bonds are likely to play an increasingly
to an investment portfolio, as their returns are not important role in the global risk management landscape.
correlated with traditional fixed income or equity
Insurers are likely to continue to turn to catastrophic bonds
markets.
as a way to manage their risk exposure and improve their
financial stability.In addition to the growing demand for
Risks of Catastrophic Bonds catastrophic bonds from insurers, there is also increasing
Catastrophic bonds are a unique form of risk management interest from investors. As interest rates have remained low
instrument that offer insurers a mechanism to transfer the in recent years, investors have been searching for higher-
financial risk of catastrophic events to the capital markets. yielding fixed income investments. Catastrophic bonds offer
While they offer potential benefits to both insurers and the potential for high returns, making them an attractive
investors, they also come with risks that should be carefully investment option for some investors.
considered. Despite their potential benefits, catastrophic
bonds also come with risks.
Conclusion
The primary risk for investors is the possibility of losing
In conclusion, catastrophic bonds are a unique form of risk
some or all of their investment if a catastrophic event
management instrument that offer insurers a mechanism
occurs.
to transfer the financial risk of catastrophic events to the
Catastrophic bonds can be complex instruments, and
capital markets. While they offer potential benefits to both
investors may not fully understand the risks involved.
insurers and investors, they also come with risks that should
Catastrophic events can be difficult to predict, which be carefully considered. As the frequency and severity of
can make it challenging to accurately price the bonds. catastrophic events continue to increase, catastrophic bonds
For insurers, there is also the risk that investors may are likely to play an increasingly important role in the global
not be willing to invest in the bonds at the desired rate. risk management landscape.The growth of the market for
If there is insufficient demand for the bonds, insurers catastrophic bonds in recent years underscores their
may be unable to transfer the financial risk of importance in the insurance industry and their potential as
catastrophic events to the capital markets. an investment option for investors.

ICICI to offer EMIs for UPI payments above Rs. 10,000

ICICI Bank has introduced an equated monthly instalment (EMI) facility for UPI payments made by scanning QR code.
The facility will be available for customers who are eligible for the bank's 'buy now pay later' scheme - PayLater.
Customers can pay transaction amount above Rs 10,000 in the form of instalments in three, six, or nine months. The
EMI facility for PayLater will shortly be extended for online shopping as well, the bank said in a statement. The
facility can be availed of across a host of categories such as electronics, groceries, fashion apparel, travel, and hotel
bookings.
Bijith Bhaskar, Head- Digital Channels & Partnership, ICICI Bank, said "We have seen that maximum payments these
days are made through UPI. In addition, we have observed that customers are increasingly opting for UPI transac-
tions from PayLater, the Bank's 'buy now, pay later' service. ICICI Bank introduced PayLater facility in 2018 to enable
customers to buy small ticket items immediately in a completely digital and paperless manner. PayLater facility enables
customers to shop online, pay bills, and pay to any merchant UPI ID at physical stores instantly.
During the monetary policy review announcement earlier this month, the Reserve Bank of India (RBI) proposed to
expand the scope of UPI by enabling transfer to/from pre-sanctioned credit lines at banks. At present, UPI handles
75 per cent of the digital payment volumes in India.

44 | 2023 | MAY | BANKING FINANCE