Reinsurance Demand and Liquidity Creation
58 Pages Posted: 7 Apr 2017
Date Written: February 23, 2017
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: Suggested Citation