Does Reinsurance Need Reinsurers?

Posted: 18 Feb 2005

See all articles by Guillaume Plantin

Guillaume Plantin

University of Toulouse 1 - Toulouse School of Economics (TSE)

Date Written: June 2004

Abstract

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 paper 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.

Suggested Citation

Plantin, Guillaume, Does Reinsurance Need Reinsurers? (June 2004). Available at SSRN: https://ssrn.com/abstract=650840

Guillaume Plantin (Contact Author)

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

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