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An Empirical assessment of reinsurance risk

Iman Lelyveld, Franka Liedorp and Manuel Kampman

DNB Working Papers from Netherlands Central Bank, Research Department

Abstract: We analyse the effect of failing reinsurance cover on the stability of Dutch insurers. As insurers often reinsure themselves with other (re)insurers, losses could spread contagiously through the sector. Using a unique and confidential data set on reinsurance exposures, we perform a scenario analysis to measure contagion risks. Based on current exposures, we find no evidence of systemic risk in the Netherlands, even if multiple reinsurance companies fail simultaneously. Next, we analyse to what extent the financial position of individual primary insurers is affected following a particular shock, considering solvency, capital and profit levels. The life insurance industry is hardly affected by reinsurance failures. The non-life industry, however, is vulnerable to a crisis in the European reinsurance market. We also find that members of smaller insurance groups are particularly exposed.

Keywords: reinsurance; contagion; simulation. (search for similar items in EconPapers)
JEL-codes: G20 G22 (search for similar items in EconPapers)
Date: 2009-02
New Economics Papers: this item is included in nep-eec, nep-ias and nep-rmg
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Related works:
Journal Article: An empirical assessment of reinsurance risk (2011) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:dnb:dnbwpp:201

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