Toward a Theory of Reinsurance and Retrocession

Michael Powers (powers@sem.tsinghua.edu.cn) and Martin Shubik

No 1227, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: There is a natural tradeoff between the benefits of increasing the number of competitors in an insurance market and the drawback to the weakening of the law of large numbers due to the diminishing of average reserves. In this investigation we consider the possibility for optimal layers of reinsurance and retrocession in the design of the insurance industry. A general question which may be asked of all financial institutions is what factors limit the number of layers of paper which can be constructed?

Keywords: Reinsurance; retrocession; strategic market game (search for similar items in EconPapers)
JEL-codes: C22 C72 (search for similar items in EconPapers)
Pages: 47 pages
Date: 1999-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Insurance: Mathematics and Economics (2001), 29(2): 271-290

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