Supply and Demand for Terrorism Insurance: Lessons from Germany
In our article we consider insurance as a means of allocating terrorism risk. Terrorism poses a significant challenge for insurers worldwide. In terms of possible losses it fits into the same category as earthquakes and hurricanes. Yet as a result of the uncertainty surrounding these risks private markets face significant difficulties in providing insurance for it. In the insurance industry costly risk bearing can explain the supply of capacity risks. Corporate risk management theory provides reasons why transaction costs can motivate firms to purchase insurance. In the context of these tightly connected theories we derive models for both the supply of terrorism reinsurance and the demand for terrorism insurance. Using two datasets from the German terrorism insurer we estimate models on how corporations in Germany employ government sponsored insurance to manage their terrorism risk and on the factors that determine the supply for private market terrorism reinsurance.
|Date of creation:||Jun 2006|
|Contact details of provider:|| Postal: Koenigsworther Platz 1, D-30167 Hannover|
Phone: (0511) 762-5350
Fax: (0511) 762-5665
Web page: http://www.wiwi.uni-hannover.de
More information through EDIRC
References listed on IDEAS
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.:
- Dwight M. Jaffee & Thomas Russell, 1996. "Catastrophe Insurance, Capital Markets and Uninsurable Risks," Center for Financial Institutions Working Papers 96-12, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Stulz, René M., 1984. "Optimal Hedging Policies," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 19(02), pages 127-140, June.
- Doherty, Neil A & Lamm-Tennant, Joan & Starks, Laura T, 2003. "Insuring September 11th: Market Recovery and Transparency," Journal of Risk and Uncertainty, Springer, vol. 26(2-3), pages 179-199, March-May.
- Erwann Michel-Kerjan & Burkhard Pedell, 2005. "Terrorism Risk Coverage in the Post-9/11 Era: A Comparison of New Public–Private Partnerships in France, Germany and the U.S.*," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 30(1), pages 144-170, January.
- Heckman, James, 2013.
"Sample selection bias as a specification error,"
Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
- Warner, Jerold B, 1977. "Bankruptcy Costs: Some Evidence," Journal of Finance, American Finance Association, vol. 32(2), pages 337-347, May.
- Keohane, Nathaniel O & Zeckhauser, Richard J, 2003. "The Ecology of Terror Defense," Journal of Risk and Uncertainty, Springer, vol. 26(2-3), pages 201-229, March-May.
- Fischhoff, Baruch & Gonzalez, Roxana M. & Small, Deborah A. & Lerner, Jennifer S., 2003. "Judged Terror Risk and Proximity to the World Trade Center," Journal of Risk and Uncertainty, Springer, vol. 26(2-3), pages 137-151, March-May.
- Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
- Kunreuther, Howard & Heal, Geoffrey, 2003. "Interdependent Security," Journal of Risk and Uncertainty, Springer, vol. 26(2-3), pages 231-249, March-May.
- 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.
- Kenneth A. Froot & David S. Scharfstein & Jeremy C. Stein, 1992.
"Risk Management: Coordinating Corporate Investment and Financing Policies,"
NBER Working Papers
4084, National Bureau of Economic Research, Inc.
- Froot, Kenneth A & Scharfstein, David S & Stein, Jeremy C, 1993. " Risk Management: Coordinating Corporate Investment and Financing Policies," Journal of Finance, American Finance Association, vol. 48(5), pages 1629-1658, December.
- J. David Cummins & Olivier Mahul, 2004. "The Demand for Insurance With an Upper Limit on Coverage," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 71(2), pages 253-264.
- Anne Gron, 1999. "Insurer Demand for Catastrophe Reinsurance," NBER Chapters, in: The Financing of Catastrophe Risk, pages 23-50 National Bureau of Economic Research, Inc.
- Neil A. Doherty & Clifford W. Smith, 1993. "Corporate Insurance Strategy: The Case Of British Petroleum," Journal of Applied Corporate Finance, Morgan Stanley, vol. 6(3), pages 4-15.
- Mayers, David & Smith, Clifford W, Jr, 1982. "On the Corporate Demand for Insurance," The Journal of Business, University of Chicago Press, vol. 55(2), pages 281-296, April.
When requesting a correction, please mention this item's handle: RePEc:han:dpaper:dp-340. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Heidrich, Christian)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.