The Reinsurance Network Among U.S. Property-Casualty Insurers: Microstructure, Insolvency Risk, and Contagion

80 Pages Posted: 8 Feb 2015 Last revised: 6 May 2018

See all articles by Hua Chen

Hua Chen

University of Hawaiʻi at Mānoa

J David Cummins

Temple University - Risk Management & Insurance & Actuarial Science

Tao Sun

Lingnan University

Mary A. Weiss

Temple University

Date Written: January 15, 2018

Abstract

Reinsurance is the primary source of interconnectedness in the insurance industry. As such, reinsurance connectivity provides a transmission mechanism for financial shocks and potentially exposes insurers to contagion and systemic risk. In this paper, connectivity within the U.S. property-casualty (P/C) reinsurance market is modeled as a network. We model the network of all primary insurers and reinsurers in the market. We analyze all bilateral reinsurance counterparty relationships (domestic and foreign) of U.S. P/C insurers, and we model both intra- and inter-group transactions. We extend the prior literature by providing a detailed examination of the reinsurance network structure, including network density, network components, centrality of individual insurers, and sub-network analysis for top insurers and for insurance groups. Our analysis of contagion and insolvency risk reveals that even the failure of the top 10 in-degree or in-strength insurers with 100 percent loss given default would not lead to widespread insolvencies in the U.S. P/C insurance industry.

Keywords: Reinsurance, network analysis, insolvency, contagion, systemic risk, property-casualty insurance

JEL Classification: G20, G22, L14, G01

Suggested Citation

Chen, Hua and Cummins, J. David and Sun, Tao and Weiss, Mary A., The Reinsurance Network Among U.S. Property-Casualty Insurers: Microstructure, Insolvency Risk, and Contagion (January 15, 2018). Available at SSRN: https://ssrn.com/abstract=2560324 or http://dx.doi.org/10.2139/ssrn.2560324

Hua Chen (Contact Author)

University of Hawaiʻi at Mānoa ( email )

2404 Maile Way, E-602e
Honolulu, HI 96822
United States
(808) 956-8063 (Phone)
(808) 956-9887 (Fax)

J. David Cummins

Temple University - Risk Management & Insurance & Actuarial Science ( email )

Fox School of Business and Management
1801 Liacouras Walk.
Philadelphia, PA 19122
United States
215-204-8468 (Phone)
215-204-4712 (Fax)

Tao Sun

Lingnan University ( email )

8 Castle Peak Road
Lingnan University
Hong Kong, New Territories
China

Mary A. Weiss

Temple University ( email )

Fox School of Business and Management
1801 Liacouras Walk
Philadelphia, PA 19122
United States
215-204-1916 (Phone)

HOME PAGE: http://www.sbm.temple.edu/~rmidept/weiss.html

Register to save articles to
your library

Register

Paper statistics

Downloads
159
Abstract Views
807
rank
187,586
PlumX Metrics