Time variation in the price of catastrophe reinsurance

Keswani, A (2000) Time variation in the price of catastrophe reinsurance. Working Paper. The Department of Accounting and Finance, Lancaster University.

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Abstract

It has been shown that the price of catastrophe reinsurance varies considerably over time. In particular, prices tend to rise after catastrophes and drift down between catastrophes. We construct a dynamic model to explain these stylised features. The model has three sets of players; households, insurers and a reinsurer. As catastrophe losses are undiversifiable, insurers must set aside capital or buy reinsurance to cover losses in the eventuality of a catastrophe. This is costly because of alternative investment opportunities. We show that imperfections in the capital market are crucial for generating time variation in the price of catastrophe reinsurance.

Item Type:
Monograph (Working Paper)
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/aacsb/disciplinebasedresearch
Subjects:
ID Code:
48608
Deposited By:
Deposited On:
11 Jul 2011 21:01
Refereed?:
No
Published?:
Published
Last Modified:
09 Feb 2020 00:24