The costs and benefits of reinsurance
| Autor: | J. David Cummins, Georges Dionne, Robert Gagné, Abdelhakim Nouira |
|---|---|
| Rok vydání: | 2021 |
| Předmět: |
Reinsurance
History Economics and Econometrics Insolvency Polymers and Plastics 01 natural sciences Industrial and Manufacturing Engineering 010104 statistics & probability Accounting 0502 economics and business Capital cost Business and International Management 0101 mathematics health care economics and organizations Risk management Finance 050208 finance Actuarial science Cost–benefit analysis business.industry reinsurance insolvency risk risk management financial intermediation cost functions panel data 05 social sciences Liability General Business Management and Accounting Purchasing Business Underwriting |
| Zdroj: | The Geneva Papers on Risk and Insurance - Issues and Practice. 46:177-199 |
| ISSN: | 1468-0440 1018-5895 |
| Popis: | Purchasing reinsurance reduces insurers’ insolvency risk by stabilising loss experience, increasing capacity, limiting liability on specific risks and/or protecting against catastrophes. Consequently, purchasing reinsurance should reduce capital costs. However, transferring risk to reinsurers is expensive. The cost of reinsurance for an insurer can be much larger than the actuarial price of the risk transferred. In this article, we analyse empirically the costs and the benefits of reinsurance for a sample of U.S. property–liability insurers. The results show that the purchase of reinsurance significantly increases insurers’ costs but significantly reduces the volatility of the loss ratio. With purchasing reinsurance, insurers accept to pay higher costs of insurance production to reduce their underwriting risk. |
| Databáze: | OpenAIRE |
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