Reinsurance Brokers and Advice Quality: Is There a Need for Regulation&quest

Michael Sonnenholzner, Sebastian Friese and Johann Graf von der Schulenburg
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Michael Sonnenholzner: Munich Re, Königinstrasse 107, 80802, Munich Germany
Sebastian Friese: [1] aMunich Re, Königinstrasse 107, 80802, Munich Germany[2] bInstitute for Risk and Insurance, Leibniz University Hannover, Germany

The Geneva Risk and Insurance Review, 2009, vol. 34, issue 1, 20-46

Abstract: Brokers play an increasing role in the distribution of reinsurance. In order to analyse reinsurance brokers' advice quality, we employ a model in which a monopoly broker advises cedents to buy a particular one out of similar reinsurance policies that cost the same but differ in details. The broker decides on how much to invest in his advice quality and on the price to charge for his service. We find that the broker's advice quality is generally lower and the price for his service higher than in the social optimum, even in the presence of a potential new entrant. The Geneva Risk and Insurance Review (2009) 34, 20–46. doi:10.1057/grir.2008.14

Date: 2009
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