IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpri/9507002.html
   My bibliography  Save this paper

The Demand For Reinsurance: Theory and Empirical Tests

Author

Listed:
  • James R. GARVEN

Abstract

This paper investigates the valuation effects of reinsurance purchases in a contingent claims framework. The comparative statics of the model suggest that, other things held constant, the demand for reinsurance will be greater, 1) the higher the firm's leverage, 2) the lower the correlation between the firm's investment returns and claims costs, 3) for firms which write "longer-tail" lines of insurance, and 4) the more the firm concentrates its investments in tax-favored assets. These predictions are tested in an empirical analysis of the reinsurance behavior of U.S. property-liability insurance firms during the 1980's.

Suggested Citation

  • James R. GARVEN, 1995. "The Demand For Reinsurance: Theory and Empirical Tests," Risk and Insurance 9507002, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpri:9507002
    Note: Type of Document - PostScript; pages: 26; figures: none
    as

    Download full text from publisher

    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/ri/papers/9507/9507002.pdf
    Download Restriction: no

    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/ri/papers/9507/9507002.ps.gz
    Download Restriction: no

    References listed on IDEAS

    as
    1. 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.
    2. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    3. Brennan, M J, 1979. "The Pricing of Contingent Claims in Discrete Time Models," Journal of Finance, American Finance Association, vol. 34(1), pages 53-68, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    reinsurance; options; asymmetric taxes;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpri:9507002. 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: (EconWPA). General contact details of provider: https://econwpa.ub.uni-muenchen.de .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.