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Do Insurers in Catastrophe-Prone Regions Buy Enough Reinsurance?

Author

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  • Alejandro Drexler
  • Florentine M. Eloundou Nekoul

Abstract

To protect themselves from catastrophic losses, insurance companies buy insurance, in the same way that people do. These contracts are called reinsurance agreements, and come in two main forms: proportional and nonproportional contracts. In proportional reinsurance contracts, a reinsurer agrees to repay a fixed proportion of losses incurred by the primary insurer. The simplicity of the agreement makes these types of contracts inexpensive and easy to administer. Therefore, they can be ideal risk-management tools for small insurance companies.

Suggested Citation

  • Alejandro Drexler & Florentine M. Eloundou Nekoul, 2016. "Do Insurers in Catastrophe-Prone Regions Buy Enough Reinsurance?," Chicago Fed Letter, Federal Reserve Bank of Chicago.
    • Handle: RePEc:fip:fedhle:00048
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    Citations

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    Cited by:

    1. Hiro Ito & Robert N. McCauley, 2022. "A Disaster Under-(Re)Insurance Puzzle: Home Bias in Disaster Risk-Bearing," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 70(4), pages 735-772, December.
    2. Alejandro Drexler & Richard Rosen, 2022. "Exposure to catastrophe risk and use of reinsurance: an empirical evaluation for the U.S," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 47(1), pages 103-124, January.

    More about this item

    Keywords

    Insurance; Property casualty;

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