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Convergence in Wholesale Financial Services: Reinsurance and Investment Banking

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  • J David Cummins

    (The Wharton School, 3620 Locust Walk, 3303 Steinberg Hall-Dietrich Hall, Philadelphia, PA 19104, U.S.A.)

Abstract

One of the most significant economic developments of the past decade has been the convergence of the previously separate segments of the financial services industry – particularly the banking and insurance sectors. Convergence has been driven by increasing globalization of the financial services sector, the deregulation of financial markets, and advances in computer and modelling technologies. The shift in focus towards enterprise-wide corporate risk management solutions has created a growing demand for new risk management products. These developments provide opportunities for the traditional wholesalers of risk management products, particularly investment banks and reinsurers. The paper discusses the core competencies of banks and reinsurers and the factors needed for success in the evolving market. The discussion considers the merits of unbundling the traditional insurance value chain to create more responsive organizations and de-emphasize residual risk bearing by (re)insurers. The paper focuses on opportunities in innovative wholesale risk management products, including products that modify classic (re)insurance product models but do not access broader capital markets and risk-linked securities that access capital markets directly. The Geneva Papers (2005) 30, 187–222. doi:10.1057/palgrave.gpp.2510031

Suggested Citation

  • J David Cummins, 2005. "Convergence in Wholesale Financial Services: Reinsurance and Investment Banking," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 30(2), pages 187-222, April.
    • Handle: RePEc:pal:gpprii:v:30:y:2005:i:2:p:187-222
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    Citations

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    Cited by:

    1. 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.
    2. Villegas, Andrés M. & Medaglia, Andrés L. & Zuluaga, Luis F., 2012. "Computing bounds on the expected payoff of Alternative Risk Transfer products," Insurance: Mathematics and Economics, Elsevier, vol. 51(2), pages 271-281.
    3. Elyas Elyasiani & Elena Kalotychou & Sotiris Staikouras & Gang Zhao, 2015. "Return and Volatility Spillover among Banks and Insurers: Evidence from Pre-Crisis and Crisis Periods," Journal of Financial Services Research, Springer;Western Finance Association, vol. 48(1), pages 21-52, August.
    4. J. David Cummins, 2006. "Should the government provide insurance for catastrophes?," Review, Federal Reserve Bank of St. Louis, vol. 88(Jul), pages 337-380.
    5. 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.
    6. J. David Cummins, 2007. "Reinsurance for Natural and Man‐Made Catastrophes in the United States: Current State of the Market and Regulatory Reforms," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 10(2), pages 179-220, September.
    7. 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.

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