Paula Jarzabkowski, Rebecca Bednarek, and Paul Spee
- Published in print:
- 2015
- Published Online:
- April 2015
- ISBN:
- 9780199664764
- eISBN:
- 9780191811487
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199664764.003.0006
- Subject:
- Business and Management, Finance, Accounting, and Banking, International Business
Chapter 6 introduces current shifts stemming from the fact that multinational insurance companies are now buying reinsurance as large bundled multi-territory, or even global, deals that cover ...
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Chapter 6 introduces current shifts stemming from the fact that multinational insurance companies are now buying reinsurance as large bundled multi-territory, or even global, deals that cover multiple disasters. This change has fundamental consequences for how the reinsurance market works, eroding vital principles that have been an important counter-balance to the unpredictability of disasters. Specifically, it marginalizes the process through which consensus price is established. This has been critical for collective risk-bearing and flattens market cycles, which has been critical for stabilizing long-term capital flow. Such changes have a multitude of cascading effects, such as eroding business relationships, increasing the reliance on complex statistical models, and opening the gate for competition from alternative risk transfer products from new players such as hedge funds. Reinsurance is shifting from a market for Acts of God to a market for financial commodities, with potentially devastating effects for the provision of risk cover.Less
Chapter 6 introduces current shifts stemming from the fact that multinational insurance companies are now buying reinsurance as large bundled multi-territory, or even global, deals that cover multiple disasters. This change has fundamental consequences for how the reinsurance market works, eroding vital principles that have been an important counter-balance to the unpredictability of disasters. Specifically, it marginalizes the process through which consensus price is established. This has been critical for collective risk-bearing and flattens market cycles, which has been critical for stabilizing long-term capital flow. Such changes have a multitude of cascading effects, such as eroding business relationships, increasing the reliance on complex statistical models, and opening the gate for competition from alternative risk transfer products from new players such as hedge funds. Reinsurance is shifting from a market for Acts of God to a market for financial commodities, with potentially devastating effects for the provision of risk cover.
