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

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 

Source
LSE, Statistics department, Houghton Street, London
Length of Resource
28
Resource File
Author
Pauline Barrieu, Henri Louberge
Date Published
Publication Type
paper
Resource Type
academic

ResourceID: 69786

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