Managing unknown risks: the future of global reinsurance
Graciela Chichilnisky and
Geoffrey Heal
MPRA Paper from University Library of Munich, Germany
Abstract:
It has been said that insurance is the last of the financial services to accept radical change (Denney [1995-1996]). Yet there has been a fundamental shift in the geographic location and in the organization of the reinsurance industry in the last six years (Chichilnisky [19966]). Global environmental risks are partly responsible for this change; increased weather volatility and catastrophic risks are difficult to diversify using traditional insurance practices. To provide a map to the future, we need a realistic appraisal of how we got where we are. This is the story of how humans have hedged risks. There are two basic and distinct approaches: statistical and economic. The former is typical of the insurance industry; the latter typifies the securities industry. Both are needed to manage today's catastrophic risks. Neither alone will do. We show how a combination of both leads to efficient outcomes, and is the way to the future (Chichilnisky [1996a, 1996b, 1996d]).
Keywords: insurance; risk; global finance; environment; catastrophe bundles; climate change (search for similar items in EconPapers)
JEL-codes: D81 G22 Q51 (search for similar items in EconPapers)
Date: 1998
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Citations: View citations in EconPapers (1)
Published in The Journal of Portfolio Management (1998): pp. 85-91
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:8820
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