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USAA: Catastrophe Risk Financing
Case Study Solution (Harvard Business School Case Study)
The USAA Catastrophe Risk Financing case study solution answers the following questions in a Word
document, then provides a separate Excel file with all the schedules to provide the answers to the
questions.  

1. Describe the structure of Class A-2 and Class A-1 securities.
2. Why do you think Class A-1 securities were created?
3. Compute the price of reinsurance for layers 2, 3, and 4
4. Why is ROL typically lower for higher levels?
5. Estimate the ROL and price of reinsurance for layer 5.
6. What percentage of losses in layer 5 did USAA coinsure? What percentage is re-insured through a
third party?
7. Why is coinsurance a feature of the CAT bond structure?
8. What spread above LIBOR should Class A-2 receive? Use three independent methods to estimate
the spread.

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