The market for catastrophe risk: a clinical examination

• 成果类型: Article
• 署名作者: Froot, KA
• 署名单位: Harvard University; National Bureau of Economic Research
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/S0304-405X(01)00052-6
• 发表日期: 2001
• 页码: 529-571
• 关键词: reinsurance; catastrophe; risk management

摘要

This paper examines the market for catastrophe event risk - i.e., financial claims that are linked to losses associated with natural hazards, such as hurricanes and earthquakes. Risk management theory suggests protection by insurers and other corporations against the largest cat events is most valuable. However, most insurers purchase relatively little cat reinsurance against large events, and premiums are high relative to expected losses. To understand why the theory fails, we examine transactions that look to capital markets, rather than traditional reinsurance markets, for risk-bearing capacity. We develop eight theoretical explanations and find the most compelling to be supply restrictions associated with capital market imperfections and market power exerted by traditional reinsurers. (C) 2001 Elsevier Science S.A. All rights reserved.