Reinsurance Demand and Liquidity Creation

58 Pages Posted: 7 Apr 2017

See all articles by Denise Desjardins

Denise Desjardins

University of Montreal - Center for Research on Transportation

Georges Dionne

HEC Montreal - Department of Finance

Date Written: February 23, 2017

Abstract

This paper analyzes the relation between insurers’ liquidity creation and reinsurance demand. The empirical measure of liquidity creation was developed for banks by Berger and Bouwman (2009), who distinguished two important bank activities: liquidity creation and risk transformation. Insurers also actively transform risk, but the extent of their engagement in liquidity creation is less clear. Because liquidity creation is a risky activity, it may affect the demand for reinsurance. The goal of this study is to analyze how liquidity creation affects demand for reinsurance.

Keywords: Liquidity Creation, Reinsurance, Risk Transformation, Insurance

JEL Classification: G21, G22, G32

Suggested Citation

Desjardins, Denise and Dionne, Georges, Reinsurance Demand and Liquidity Creation (February 23, 2017). Available at SSRN: https://ssrn.com/abstract=2947325 or http://dx.doi.org/10.2139/ssrn.2947325

Denise Desjardins

University of Montreal - Center for Research on Transportation ( email )

C.P. 6128, Succ. Centre-Ville
Montreal, Quebec H3C 3J7
Canada

Georges Dionne (Contact Author)

HEC Montreal - Department of Finance ( email )

3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada
514-340-6596 (Phone)
514-340-5019 (Fax)

HOME PAGE: http://www.hec.ca/gestiondesrisques/

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