Assessment of the openness level of the reinsurance market on the basis of gravity modeling

Olha Kuzmenko ()

Economy and Forecasting, 2013, issue 3, 134-144

Abstract: One of the prerequisites for a successful development of the financial services market is the effective functioning of the reinsurance market, which acts as a complex dynamic system. On that ground, the article provides a review of the market as a network structure that allows to get rid of some shortcomings in the management decisions of the market subjects (especially on its segmentation and clustering). The necessity to improve the statistical methods of quantitative estimates of the reinsurance market and increase the range of its comprehensive analysis determines the relevance of the study of market as a social network model. The level of openness of the reinsurance market represents a characteristic of solvency, operation stability and rating of the market participants. As it is based on the formalization of relationships and interdependencies between the parties, the author provides a description and forecasting of the structural functioning of the domestic reinsurance market with the use of gravity modeling. Modeling the openness level of the reinsurance market with the use of gravity modeling provides an opportunity to obtain the following results: to quantify the strength of interaction between the considered and other contractor countries in the context of reinsurance activity; to cluster the directions and sources of reinsurance operations; to determine economically sound strategy and tactics of behavior of the reinsurance market subjects; and to identify priorities for the selection of countries for the reinsurance of own risks and those transmitting part of their insurance premiums to reinsurance based on the insurers' rating.

Date: 2013
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