Does Reinsurance Need Reinsurers?
The reinsurance market is the secondary market for insurance risks. It has a very specific organization. Direct insurers rarely trade risks with each other. Rather, they cede part of their primary risks to specialized professional reinsurers who have no primary business. This article offers a model of equilibrium in reinsurance and capital markets in which professional reinsurers arise endogenously. Their role is to monitor primary insurers credibly, so that insurers can raise capital more easily. In equilibrium, the financial structure of primary insurers consists of a mix of reinsurance and outside capital. The comparative statics yield empirical predictions which are broadly in line with a number of stylized facts from the reinsurance market. Copyright The Journal of Risk and Insurance, 2006.
(This abstract was borrowed from another version of this item.)
|Date of creation:|
|Contact details of provider:|| Postal: Tepper School of Business, Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, PA 15213-3890|
Web page: http://www.tepper.cmu.edu/
|Order Information:||Web: http://student-3k.tepper.cmu.edu/gsiadoc/GSIA_WP.asp|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Neil Doherty & Kent Smetters, 2005. "Moral Hazard in Reinsurance Markets," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 72(3), pages 375-391.
- Mathias Dewatripont & Jean Tirole, 1994. "The prudential regulation of banks," ULB Institutional Repository 2013/9539, ULB -- Universite Libre de Bruxelles.
- Bengt Holmstrom & Jean Tirole, 1997.
"Financial Intermediation, Loanable Funds, and The Real Sector,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 112(3), pages 663-691.
- Bengt Holmstrom & Jean Tirole, 1994. "Financial Intermediation, Loanable Funds and the Real Sector," Working papers 95-1, Massachusetts Institute of Technology (MIT), Department of Economics.
- Holmström, Bengt & Tirole, Jean, 1994. "Financial Intermediation, Loanable Funds and the Real Sector," IDEI Working Papers 40, Institut d'Économie Industrielle (IDEI), Toulouse.
- Doherty, N A & Tinic, S M, 1981. "Reinsurance under Conditions of Capital Market Equilibrium: A Note," Journal of Finance, American Finance Association, vol. 36(4), pages 949-953, September.
- Innes, Robert D., 1990. "Limited liability and incentive contracting with ex-ante action choices," Journal of Economic Theory, Elsevier, vol. 52(1), pages 45-67, October.
- Douglas W. Diamond, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Oxford University Press, vol. 51(3), pages 393-414.
- Mayers, David & Smith, Clifford W, Jr, 1990. "On the Corporate Demand for Insurance: Evidence from the Reinsurance Market," The Journal of Business, University of Chicago Press, vol. 63(1), pages 19-40, January. Full references (including those not matched with items on IDEAS)