Securitization, Insurance and Reinsurance

07/2009

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This paper considers strengths and weaknesses of reinsurance and securitization in managing insurable risks. Traditional reinsurance operates efficiently in managing relatively small, uncorrelated risks and in facilitating efficient information sharing between cedants and reinsurers. However, when the magnitude of potential losses and the correlation of risks increase, the efficiency of the reinsurance model breaks down. At this juncture, securitization has a role to play by passing the risks along to broader capital markets.

 

  • J. David Cummins (Temple University and University of Pennsylvania) and Philippe Trainar (SCOR)  

SCOR Paper #5

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