Value from Hedging Risk with reinsurance

Nicos A. Scordis and Petra Steinorth

Journal of Insurance Issues, 2012, vol. 35, issue 2, 210-231

Abstract: Reinsurance is a transaction insurance firms use to hedge risk. Existing studies have only investigated the demand for reinsurance. Thus, we do not have direct evidence on whether the use of reinsurance creates value. Our study provides this evidence. We find a positive relation between the use of reinsurance and value. This relation is nuanced. Our results suggest that shareholders fully recognize the value of hedging only in the absence of noise in the firm’s environment. Our results also suggest that the use of hedging creates value for shareholders because hedging may be a less expensive substitute to holding capital.

Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.insuranceissues.org/PDFs/352SS.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wri:journl:v:35:y:2012:i:2:p:210-231

Access Statistics for this article

Journal of Insurance Issues is currently edited by James Barrese

More articles in Journal of Insurance Issues from Western Risk and Insurance Association
Bibliographic data for series maintained by James Barrese ().