21Jun17

SCOR Live Blog

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On the Diversification Benefit of Reinsurance Portfolios

Régis Bettinger, Quantitative Financial Risk Analyst at SCOR, Michel Dacorogna (DEAR-Consulting, former SCOR Scientific Advisor) and Jeta Limani (former SCOR trainee), have written a SCOR Paper on the benefits of diversification in reinsurance portfolios.

Reinsurance business thrives on risk diversification. This SCOR paper demonstrates mathematically that non-proportional contracts - typical reinsurance products – lend themselves more to diversification than proportional contracts. This significant conclusion was reached as part of Master’s thesis in quantitative finance at ETH Zurich, a leading risk research institution. The study explains why reinsurers’ internal models produce better diversification benefits than the standard formula of Solvency 2.