Optimal Risk Financing in Large Corporations through Insurance Captives
Pierre Picard and
Jean Pinquet ()
The Geneva Risk and Insurance Review, 2013, vol. 38, issue 1, 48-86
A captive is an insurance or reinsurance company established by a parent group to finance its own risks. Captives mix internal risk pooling between the business units of the parent group and risk transfer towards the reinsurance market. We analyse captives from an optimal insurance contract perspective. The paper characterises the vertical contractual chain that links firstly business units to insurance captives or to “fronters” through insurance contracts, secondly fronters to reinsurance captives through the cession of risks and thirdly insurance or reinsurance captives to reinsurers through cessions or retrocessions. In particular, the risk cession by fronters to a reinsurance captive trades off the benefits derived from recouped premiums and from the risk-sharing advantage of an “umbrella reinsurance policy”, against the risks that result from the captive liabilities.
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://www.palgrave-journals.com/grir/journal/v38/n1/pdf/grir20124a.pdf Link to full text PDF (application/pdf)
http://www.palgrave-journals.com/grir/journal/v38/n1/full/grir20124a.html Link to full text HTML (text/html)
Access to full text is restricted to subscribers.
Working Paper: Optimal risk financing in large corporations through insurance captives (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:pal:genrir:v:38:y:2013:i:1:p:48-86
Ordering information: This journal article can be ordered from
Access Statistics for this article
The Geneva Risk and Insurance Review is currently edited by Michael Hoy and Nicolas Treich
More articles in The Geneva Risk and Insurance Review from Palgrave Macmillan, International Association for the Study of Insurance Economics (The Geneva Association) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla ().