Reinsurance and securitisation of life insurance risk: the impact of regulatory constraints

Pauline Barrieu and Henri Loubergé
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Pauline Barrieu: London School of Economics

No 11-57, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Large systematic risks, such as those arising from natural catastrophes, climatic changes and uncertain trends in longevity increases, have risen in prominence at a societal level and, more particularly, have become a highly relevant issue for the insurance industry. Against this background, the combination of reinsurance and capital market solutions (insurance-linked securities) has received an accrued interest. In this paper, we develop a general model of optimal risk-sharing among three representative agents – an insurer, a reinsurer and a financial investor, making a distinction between systematic and idiosyncratic risks. We focus on the impact of regulation on risk transfer, by differentiating reinsurance and securitisation in terms of their impact on reserve requirements. Our results show that different regulatory prescriptions will lead to quite different results in terms of global risk-sharing.

Keywords: Reinsurance; Risk sharing; Risk measures; Longevity risk; Insurance-Linked securities (search for similar items in EconPapers)
JEL-codes: G22 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2011-10
New Economics Papers: this item is included in nep-ban, nep-ias and nep-rmg
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Related works:
Journal Article: Reinsurance and securitisation of life insurance risk: The impact of regulatory constraints (2013)
Working Paper: Reinsurance and securitisation of life insurance risk: the impact of regulatory constraints (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1157

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