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Does reinsurance purchasing enhance insurers’ competitiveness? Evidence from the U.S. property–liability insurance industry

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  • Vincent Y. Chang

    (Feng Chia University)

Abstract

This study investigates whether firms that purchase more strategic reinsurance ex ante could enhance their competitiveness in the output market ex post for the U.S. property–liability insurance industry. The empirical results show that reinsurance purchasing does not increase insurers’ competitiveness ex post, which contradicts the prediction of the strategic commitment hypothesis. A plausible explanation is that the U.S. property–liability industry tends to be a completely competitive market and not an oligopoly. In addition, reinsurance purchasing seems to be regarded as an insurer’s operational characteristic and not to be treated as a strategic demand for sending an aggressive signal on the output market to its competitors.

Suggested Citation

  • Vincent Y. Chang, 2019. "Does reinsurance purchasing enhance insurers’ competitiveness? Evidence from the U.S. property–liability insurance industry," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 44(4), pages 595-623, October.
    • Handle: RePEc:pal:gpprii:v:44:y:2019:i:4:d:10.1057_s41288-019-00124-y
    DOI: 10.1057/s41288-019-00124-y
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