1. 1 Comments for the choice of trigger in an insurance linked security: the brevity risk case Discussant : Chia-Chien Chang, National Sun Yat-sen University, Taiwan ARIA Conference 2007

2. 2 Purposes and conclusions (1) Take the brevity risk (the risk of premature death) case to study the choice of trigger in an insurance linked security Model an insurer or reinsurer that is subject to insolvency risk, which creates an incentive problem known as the judgment proof problem  yields a situation in which management selects a level of care less than the socially efficient level

3. 3 Purposes and conclusions (2) The indemnity triggered insurance linked security (ILS)  cannot provide the incentive for adequate care since the maximum care is that for the unhedged case The index trigger in the ILS  the moral hazard problem can be eliminated  the insolvency risk can be mitigated or eliminated  the socially efficient care can be achieved

4. 4 Purposes and conclusions (3) Compare index and indemnity-based hedging and investigate which can create the greater value for shareholders  index based instrument dominates the indemnity based instrument  reduces insolvency risk  provides the corporate manager with the incentive to take more rather than less care

5. 5 Questions and suggestions (1) Mortality indices  The Credit Suisse Longevity Index Lack transparency Transparency risk  What types of mortality linked securities have been issued ?

6. 6 Questions and suggestions (2) Basis risk by age can be managed  Mortality improvement are highly correlated across age. Maybe the authors can describe and consider this important phenomena in this article.

7. 7 Questions and suggestions (3) Type error For example: In page 8, D 12 ∏ <0 should be D 12 ∏(a u, w) <0. In page 9, equation (10), dP should be dP(w). In page 12, equation (16), ∏ should be ∏(a, w) and L should be L (a, w).

8. 8 End Thanks