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The Future of Global Reinsurance

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  • Chichilnisky, Graciela

Abstract

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 economical. 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. I will show below how a combination of both leads to efficient outcomes, and is the way to be the future. Hedging unknown catastrophic risks requires a blend of skills from the securities and the insurance industries. By tapping large and liquid capital markets, reinsurers will be better able to deal with correlated, catastrophic risks. At the end of the intelligent customized use of derivatives and technology will separate the winners from the losers.

Suggested Citation

  • Chichilnisky, Graciela, 1996. "The Future of Global Reinsurance," MPRA Paper 8334, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:8334
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    File URL: https://mpra.ub.uni-muenchen.de/8334/1/MPRA_paper_8334.pdf
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    References listed on IDEAS

    as
    1. Cass, David & Chichilnisky, Graciela & Wu, Ho-Mou, 1996. "Individual Risk and Mutual Insurance," Econometrica, Econometric Society, vol. 64(2), pages 333-341, March.
    2. Chichilnisky, Graciela, 1996. "Financial Innovation in Property Catastrophe Reinsurance: The Convergence of Insurance and Capital Markets," MPRA Paper 8333, University Library of Munich, Germany.
    3. Graciela Chichilnisky & Geoffrey Heal, 1993. "Global Environmental Risks," Journal of Economic Perspectives, American Economic Association, vol. 7(4), pages 65-86, Fall.
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    Cited by:

    1. Chichilnisky, Graciela, 1998. "The economics of global environmental risk," MPRA Paper 8812, University Library of Munich, Germany.

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    More about this item

    Keywords

    hedging; hedge risk; reinsurance; catastrophe; catastrophic risks; securitization; environmental risks; global finance; catastrophe bundles; pricing;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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