The Structure of the Global Reinsurance Market: An Analysis of Efficiency, Scale, and Scope

Christian Biener, Martin Eling and Ruo Jia ()

No 1603, Working Papers on Finance from University of St. Gallen, School of Finance

Abstract: We estimate economies of scale and scope as well as cost efficiency to explain the structure of the global reinsurance market, where large reinsurers dominate, but both diversified and specialized reinsurers play important roles. The costs and benefits of size and product diversification play significant roles in the reinsurance industry as risk diversification is at the heart of the industry’s business model. We find that reinsurers with total assets less than USD 2.9 billion exhibit scale economies, while those with total assets greater than USD 15.5 billion do not. Large reinsurers are characterized by high cost efficiency; small reinsurers exhibit superior efficiency only when they are specialized. The evidence is in line with the efficient structure hypothesis and suggests an optimal size range for reinsurance firms from which the current market structure results.

Keywords: Insurance; Data Envelopment Analysis; Cost Efficiency; Market Structure; Economies of Scale; Economies of Scope (search for similar items in EconPapers)
JEL-codes: G22 L11 L25 (search for similar items in EconPapers)
Pages: 63 pages
Date: 2016-01
New Economics Papers: this item is included in nep-bec
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http://ux-tauri.unisg.ch/RePEc/usg/sfwpfi/WPF-1603.pdf (application/pdf)

Related works:
Journal Article: The structure of the global reinsurance market: An analysis of efficiency, scale, and scope (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:usg:sfwpfi:2016:03

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