Abstract

http://ssrn.com/abstract=1443105
 


 



Catastrophe Reinsurance and Risk Capital in the Wake of the Credit Crisis


Christopher L. Culp


Compass Lexecon; Risk Management Consulting Services, Inc.; Johns Hopkins University - Institute for Applied Economics, Global Health, and Study of Business Enterprise; University of Bern - Institute for Financial Management

Kevin O'Donnell


affiliation not provided to SSRN

August 3, 2009

Chicago Booth Research Paper No. 09-31
CRSP Working Paper

Abstract:     
In 2008, the property and casualty insurance industry was adversely affected by significant natural catastrophe-related losses, floundering investments, and limited access to capital markets. Catastrophe reinsurance premiums have risen and capacity has shrunk. Especially at such times, risk capital is an essential component of a P&C insurer’s economic balance sheet. In this article we review the similarities and differences between internal risk capital (provided by investors in insurance company debt and equity in the sense of Merton and Perold (1993)) and external risk capital (including traditional reinsurance, catastrophe derivatives, industry loss warranties, and insurance-linked securities). We explore the relative benefits and costs of alternative sources of risk capital for both policyholders and insurance company shareholders and analyze the impact of the credit crisis on these various interrelated markets.

Number of Pages in PDF File: 39

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Date posted: August 3, 2009 ; Last revised: October 2, 2009

Suggested Citation

Culp, Christopher L. and O'Donnell, Kevin, Catastrophe Reinsurance and Risk Capital in the Wake of the Credit Crisis (August 3, 2009). Chicago Booth Research Paper No. 09-31; CRSP Working Paper. Available at SSRN: http://ssrn.com/abstract=1443105 or http://dx.doi.org/10.2139/ssrn.1443105

Contact Information

Christopher L. Culp (Contact Author)
Compass Lexecon ( email )
332 South Michigan Avenue
Suite 1300
Chicago, IL 60604
United States
Risk Management Consulting Services, Inc. ( email )
25 E Superior St
#1806
Chicago, IL 60611
United States
HOME PAGE: http://www.rmcsinc.com
Johns Hopkins University - Institute for Applied Economics, Global Health, and Study of Business Enterprise ( email )
3400 N. Charles Street
Baltimore, MD 21218
United States
University of Bern - Institute for Financial Management ( email )
Engehaldenstrasse 4
Bern, CH-3012
Switzerland
HOME PAGE: http://cmslive3.unibe.ch/unibe/wiso/ifm/content/index_ger.html
Kevin O'Donnell
affiliation not provided to SSRN
Feedback to SSRN


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