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Reinsurance Brokers and Advice Quality: Is There a Need for Regulation?

Author

Listed:
  • Michael Sonnenholzner

    (Munich Re, Königinstrasse 107, 80802, Munich Germany)

  • Sebastian Friese

    ([1] aMunich Re, Königinstrasse 107, 80802, Munich Germany[2] bInstitute for Risk and Insurance, Leibniz University Hannover, Germany)

  • J.-Matthias Graf v. d. Schulenburg

    (Institute for Risk and Insurance, Leibniz University Hannover, Germany)

Abstract

Brokers play an increasing role in the distribution of reinsurance. In order to analyse reinsurance brokers' advice quality, we employ a model in which a monopoly broker advises cedents to buy a particular one out of similar reinsurance policies that cost the same but differ in details. The broker decides on how much to invest in his advice quality and on the price to charge for his service. We find that the broker's advice quality is generally lower and the price for his service higher than in the social optimum, even in the presence of a potential new entrant. The Geneva Risk and Insurance Review (2009) 34, 20–46. doi:10.1057/grir.2008.14

Suggested Citation

  • Michael Sonnenholzner & Sebastian Friese & J.-Matthias Graf v. d. Schulenburg, 2009. "Reinsurance Brokers and Advice Quality: Is There a Need for Regulation?," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 34(1), pages 20-46, June.
    • Handle: RePEc:pal:genrir:v:34:y:2009:i:1:p:20-46
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    Cited by:

    1. Annette Hofmann & Julia K. Neumann & David Pooser, 2018. "Plea for Uniform Regulation and Challenges of Implementing the New Insurance Distribution Directive," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 43(4), pages 740-769, October.
    2. J François Outreville, 2010. "The Geneva Risk and Insurance Review 2009: In Quest of Behavioural Insurance," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 35(3), pages 484-497, July.

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