A Reexamination of the Corporate Demand for Reinsurance

40 Pages Posted: 10 Nov 2005

See all articles by Cassandra R. Cole

Cassandra R. Cole

Florida State University - College of Business

Kathleen A. McCullough

Florida State University - College of Business

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Abstract

This study examines the effect of the state of the international reinsurance market on the demand for reinsurance by U.S. insurers using data from the years 1993 through 2000. Both the overall demand for reinsurance and the utilization of foreign reinsurance by U.S. insurers are explored. In addition to supporting the findings of prior literature related to the traditional motives for the corporate demand for insurance, evidence indicates that the state of the U.S. reinsurance industry impacts the amount of reinsurance demanded by U.S. insurers. The study also investigates reasons why U.S. insurers utilize a reinsurance program composed of both U.S. and foreign reinsurers. The results indicate that the decision to utilize some percent of foreign reinsurance is driven primarily by the financial and operational characteristics of the ceding company such as firm size, group affiliation, and organizational form. However, no support is found for the hypothesis that possible differences between the foreign and U.S. reinsurance markets impact the decision to utilize foreign reinsurance.

Keywords: Demand for Insurance, Reinsurance, International Reinsurance

JEL Classification: F20, G22

Suggested Citation

Cole, Cassandra R. and McCullough, Kathleen A., A Reexamination of the Corporate Demand for Reinsurance. Journal of Risk and Insurance, March 2006, Available at SSRN: https://ssrn.com/abstract=840811

Cassandra R. Cole

Florida State University - College of Business ( email )

423 Rovetta Business Building
Tallahassee, FL 32306-1110
United States

Kathleen A. McCullough (Contact Author)

Florida State University - College of Business ( email )

Department of Risk Management and Insurance
150 Rovetta Business Building
Tallahassee, FL 32306-1110
United States
850-644-8358 (Phone)
850-644-4077 (Fax)

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