IDEAS home Printed from https://ideas.repec.org/a/eee/insuma/v52y2013i2p135-144.html
   My bibliography  Save this article

Reinsurance and securitisation of life insurance risk: The impact of regulatory constraints

Author

Listed:
  • Barrieu, Pauline
  • Loubergé, Henri

Abstract

Large systematic risks, such as those arising from natural catastrophes, climatic changes and uncertain trends in longevity increases, have risen in prominence at a societal level and, more particularly, have become a highly relevant issue for the insurance industry. Against this background, the combination of reinsurance and capital market solutions (insurance-linked securities) has received an increasing interest. In this paper, we develop a general model of optimal risk-sharing among three representative agents—an insurer, a reinsurer and a financial investor, making a distinction between systematic and idiosyncratic risks. We focus on the impact of regulation on risk transfer, by differentiating reinsurance and securitisation in terms of their impact on reserve requirements. Our results show that different regulatory prescriptions will lead to quite different results in terms of global risk-sharing.

Suggested Citation

  • Barrieu, Pauline & Loubergé, Henri, 2013. "Reinsurance and securitisation of life insurance risk: The impact of regulatory constraints," Insurance: Mathematics and Economics, Elsevier, vol. 52(2), pages 135-144.
    • Handle: RePEc:eee:insuma:v:52:y:2013:i:2:p:135-144
    DOI: 10.1016/j.insmatheco.2012.11.008
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167668712001461
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.insmatheco.2012.11.008?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. David Blake & Andrew Cairns & Kevin Dowd & Richard MacMinn, 2006. "Longevity Bonds: Financial Engineering, Valuation, and Hedging," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 73(4), pages 647-672, December.
    2. J. David Cummins & Mary A. Weiss, 2009. "Convergence of Insurance and Financial Markets: Hybrid and Securitized Risk‐Transfer Solutions," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(3), pages 493-545, September.
    3. Scott E. Harrington, 2009. "The Financial Crisis, Systemic Risk, and the Future of Insurance Regulation," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(4), pages 785-819, December.
    4. Barrieu, Pauline & El Karoui, Nicole, 2005. "Inf-convolution of risk measures and optimal risk transfer," LSE Research Online Documents on Economics 2829, London School of Economics and Political Science, LSE Library.
    5. Martin Eling & Hato Schmeiser & Joan T. Schmit, 2007. "The Solvency II Process: Overview and Critical Analysis," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 10(1), pages 69-85, March.
    6. Alex Cowley & J. David Cummins, 2005. "Securitization of Life Insurance Assets and Liabilities," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 72(2), pages 193-226, June.
    7. Pauline Barrieu & Nicole El Karoui, 2005. "Inf-convolution of risk measures and optimal risk transfer," Finance and Stochastics, Springer, vol. 9(2), pages 269-298, April.
    8. J. David Cummins, 2008. "CAT Bonds and Other Risk‐Linked Securities: State of the Market and Recent Developments," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 11(1), pages 23-47, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. J. David Cummins & Georges Dionne & Robert Gagné & Abdelhakim Nouira, 2021. "The costs and benefits of reinsurance," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 46(2), pages 177-199, April.
    2. Susanna Levantesi & Massimiliano Menzietti, 2017. "Maximum Market Price of Longevity Risk under Solvency Regimes: The Case of Solvency II," Risks, MDPI, vol. 5(2), pages 1-21, May.
    3. Cheung, Ka Chun & Phillip Yam, Sheung Chi & Yuen, Fei Lung & Zhang, Yiying, 2020. "Concave distortion risk minimizing reinsurance design under adverse selection," Insurance: Mathematics and Economics, Elsevier, vol. 91(C), pages 155-165.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Götze, Tobias & Gürtler, Marc, 2020. "Risk transfer and moral hazard: An examination on the market for insurance-linked securities," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 758-777.
    2. Patricia H. Born & Barbara Klimaszewski-Blettner, 2013. "Should I Stay or Should I Go? The Impact of Natural Disasters and Regulation on U.S. Property Insurers’ Supply Decisions," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 80(1), pages 1-36, March.
    3. Chen, Hua & Cummins, J. David, 2010. "Longevity bond premiums: The extreme value approach and risk cubic pricing," Insurance: Mathematics and Economics, Elsevier, vol. 46(1), pages 150-161, February.
    4. J. David Cummins & Philippe Trainar, 2009. "Securitization, Insurance, and Reinsurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(3), pages 463-492, September.
    5. Dionne, Georges & Harrington, Scott, 2017. "Insurance and Insurance Markets," Working Papers 17-2, HEC Montreal, Canada Research Chair in Risk Management.
    6. Sabine Lemoyne de Forges & Ruben Bibas & Stéphane Hallegatte, 2001. "A dynamic model of extreme risk coverage : Resilience and e fficiency in the global reinsurance market," CIRED Working Papers halshs-00800460, HAL.
    7. Eling, Martin & Pankoke, David, 2012. "Systemic Risk in the Insurance Sector – What Do We Know?," Working Papers on Finance 1222, University of St. Gallen, School of Finance.
    8. Tomas Cipra, 2010. "Securitization of Longevity and Mortality Risk," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 60(6), pages 545-560, December.
    9. Michail Anthropelos & Constantinos Kardaras, 2014. "Equilibrium in risk-sharing games," Papers 1412.4208, arXiv.org, revised Jul 2016.
    10. Dimitrios G. Konstantinides & Georgios C. Zachos, 2019. "Exhibiting Abnormal Returns Under a Risk Averse Strategy," Methodology and Computing in Applied Probability, Springer, vol. 21(2), pages 551-566, June.
    11. Pauline Barrieu & Henri Loubergé, 2009. "Hybrid Cat Bonds," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(3), pages 547-578, September.
    12. Chen Shengzhong & Gao Niushan & Xanthos Foivos, 2018. "The strong Fatou property of risk measures," Dependence Modeling, De Gruyter, vol. 6(1), pages 183-196, October.
    13. Götze, Tobias & Gürtler, Marc, 2020. "Hard markets, hard times: On the inefficiency of the CAT bond market," Journal of Corporate Finance, Elsevier, vol. 62(C).
    14. Rose-Anne Dana & Cuong Le Van, 2009. "No-arbitrage, overlapping sets of priors and the existence of efficient allocations and equilibria in the presence of risk and ambiguity," Post-Print halshs-00281582, HAL.
    15. Gibson, Rajna & Habib, Michel A. & Ziegler, Alexandre, 2014. "Reinsurance or securitization: The case of natural catastrophe risk," Journal of Mathematical Economics, Elsevier, vol. 53(C), pages 79-100.
    16. repec:dau:papers:123456789/2278 is not listed on IDEAS
    17. Li, Peng & Lim, Andrew E.B. & Shanthikumar, J. George, 2010. "Optimal risk transfer for agents with germs," Insurance: Mathematics and Economics, Elsevier, vol. 47(1), pages 1-12, August.
    18. Blake, David & El Karoui, Nicole & Loisel, Stéphane & MacMinn, Richard, 2018. "Longevity risk and capital markets: The 2015–16 update," Insurance: Mathematics and Economics, Elsevier, vol. 78(C), pages 157-173.
    19. Martin Eling & David Antonius Pankoke, 2016. "Systemic Risk in the Insurance Sector: A Review and Directions for Future Research," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 19(2), pages 249-284, September.
    20. Dhaene, Jan & Stassen, Ben & Barigou, Karim & Linders, Daniël & Chen, Ze, 2017. "Fair valuation of insurance liabilities: Merging actuarial judgement and market-consistency," Insurance: Mathematics and Economics, Elsevier, vol. 76(C), pages 14-27.
    21. Alessandro Doldi & Marco Frittelli, 2019. "Multivariate Systemic Optimal Risk Transfer Equilibrium," Papers 1912.12226, arXiv.org, revised Oct 2021.

    More about this item

    Keywords

    G22; IM51; IM53; Reinsurance; Risk sharing; Risk measures; Longevity risk; Insurance-linked securities;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:insuma:v:52:y:2013:i:2:p:135-144. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505554 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.