Managing unknown risks: the future of global reinsurance
It has been said that insurance is the last of the financial services to accept radical change (Denney [1995-1996]). Yet there has been a fundamental shift in the geographic location and in the organization of the reinsurance industry in the last six years (Chichilnisky ). Global environmental risks are partly responsible for this change; increased weather volatility and catastrophic risks are difficult to diversify using traditional insurance practices. To provide a map to the future, we need a realistic appraisal of how we got where we are. This is the story of how humans have hedged risks. There are two basic and distinct approaches: statistical and economic. The former is typical of the insurance industry; the latter typifies the securities industry. Both are needed to manage today's catastrophic risks. Neither alone will do. We show how a combination of both leads to efficient outcomes, and is the way to the future (Chichilnisky [1996a, 1996b, 1996d]).
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- Cass, David & Chichilnisky, Graciela & Wu, Ho-Mou, 1996. "Individual Risk and Mutual Insurance," Econometrica, Econometric Society, vol. 64(2), pages 333-41, March.
- Chichilnisky, Graciela, 1996. "Financial Innovation in Property Catastrophe Reinsurance: The Convergence of Insurance and Capital Markets," MPRA Paper 8333, University Library of Munich, Germany.
- Chichilnisky, Graciela, 1998. "A Radical Shift in Managing Risks: Practical Applications of Complexity Theory," MPRA Paper 7881, University Library of Munich, Germany.
- Chichilnisky, Graciela, 1996. "Markets with endogenous uncertainty: theory and policy," MPRA Paper 8612, University Library of Munich, Germany.
- Graciela Chichilnisky & Geoffrey Heal, 1993. "Global Environmental Risks," Journal of Economic Perspectives, American Economic Association, vol. 7(4), pages 65-86, Fall.
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