Reinsurance for Natural and Man-Made Catastrophes in the United States: Current State of the Market and Regulatory Reforms
- 22 June 2007
- preprint
- Published by Elsevier BV in SSRN Electronic Journal
Abstract
U.S. insurers are heavily dependent on global reinsurance markets to enable them to provide adequate primary market insurance coverage. This paper reviews the response of the world's reinsurance industry to recent mega-catastrophes and provides recommendations for regulatory reforms that would improve the efficiency of reinsurance markets. The paper also considers the supply of insurance and reinsurance for terrorism and makes recommendations for joint public-private responses to insuring terrorism losses. The analysis shows that reinsurance markets responded efficiently to recent catastrophe losses and that substantial amounts of new capital enter the reinsurance industry very quickly following major catastrophic events. Considerable progress has been made in improving risk and exposure management, capital allocation, and rate of return targeting. Insurance price regulation for catastrophe-prone lines of business is a major source of inefficiency in insurance and reinsurance markets. Deregulation of insurance prices would improve the efficiency of insurance markets, enabling markets to deal more effectively with mega-catastrophes. The current inadequacy of the private terrorism reinsurance market suggests that the federal government may need to remain involved in this market, at least for the next several years.This publication has 19 references indexed in Scilit:
- HUL's 1Q 2008 net profit dips 3% despite 22.7% rise in operating profit: company says inflationary pressures are a cause for concernFocus on Surfactants, 2008
- Regulation of Reinsurance Recoverables: Protection or Protectionism?SSRN Electronic Journal, 2007
- A Reexamination of the Corporate Demand for ReinsuranceJournal of Risk and Insurance, 2006
- Book Review: The Science of Financial Market TradingJournal of Risk and Insurance, 2005
- Convergence in Wholesale Financial Services: Reinsurance and Investment BankingThe Geneva Risk and Insurance Review, 2005
- Homeowners Insurance With Bundled Catastrophe CoverageJournal of Risk and Insurance, 2004
- An empirical analysis of the economic impact of federal terrorism reinsuranceJournal of Monetary Economics, 2004
- Music as Brain BuilderScience, 1999
- Price, Financial Quality, and Capital Flows in Insurance MarketsJournal of Financial Intermediation, 1997
- Presidential Address: Rate SuppressionJournal of Risk and Insurance, 1992