The Financing of Catastrophe Risk (National Bureau of Economic Research Project Report)

Is it possible that the insurance and reinsurance industries cannot handle a major catastrophe? Ten years ago, the notion that the overall cost of a single catastrophic event might exceed $10 billion was unthinkable. With ever increasing property-casualty risks and unabated growth in hazard-prone areas, insurers and reinsurers now envision the possibility of disaster losses of $50 to $100 billion in the United States. Against this backdrop, the capitalization of the insurance and reinsurance industries has become a crucial concern. While it remains unlikely that a single event might entirely bankrupt these industries, a big catastrophe could place firms under severe stress, jeopardizing both policy holders and investors and causing profound ripple effects throughout the U.S. economy. The Financing of Catastrophe Risk assembles an impressive roster of experts from academia and industry to explore the disturbing yet realistic assumption that a large catastrophic event is inevitable. The essays offer tangible means of both reassessing and raising the level of preparedness throughout the insurance and reinsurance industries. Is It Possible That The Insurance And Reinsurance Industries Cannot Handle A Major Catastrophe? With Ever Increasing Property-casualty Risks And Unabated Growth In Hazard-prone Areas, Insurers And Reinsurers Now Envision The Possibility Of Disaster Losses Of $50 To $100 Billion In The United States. Against This Backdrop, The Capitalization Of The Insurance And Reinsurance Industries Has Become A Crucial Concern. While It Remains Unlikely That A Single Event Might Entirely Bankrupt These Industries, A Big Catastrophe Could Place Firms, Policy Holders, And Investors Under Stress. The Financing Of Catastrophe Risk Assembles An Impressive Roster Of Experts From Academia And Industry To Explore The Important Issue Of How Catastrophe Risk Should Be Distributed And Financed.--jacket. Insurer Demand For Catastrophe Reinsurance / Anne Gron -- Alternative Means Of Redistributing Catastrophic Risk In A National Risk-management System / Christopher M. Lewis And Kevin C. Murdock -- Pricing Excess-of-loss Reinsurance Contracts Against Catastrophic Loss / J. David Cimmins, Christopher M. Lewis, And Richard D. Phillips -- Challenges Facing The Insurance Industry In Managing Catastrophic Risks / Paul R. Kleindorfer And Howard C. Kunreuther -- The Pricing Of U.s. Catastrophe Reinsurance / Kenneth A. Froot And Paul G.j. O'connell -- Reinsurance For Catastrophes And Cataclysms / David M. Cutler And Richard J. Zeckhauser -- The Influence Of Income Tax Rules On Insurance Reserves / David F. Bradford And Kyle D. Logue -- Courting Disaster? The Transformation Of Federal Disaster Policy Since 1803 / David A. Moss -- The Moral Hazard Of Insuring The Insurers / James G. Bohn And Brian J. Hall -- Index Hedge Performance : Insurer Market Penetration And Basis Risk / John A. Major. Edited By Kenneth A. Froot. A Collection Of Papers Written For This Volume And For The Conference, The Financing Of Property Casualty Risks, Organized By The Editor Under The Auspices Of The National Bureau Of Economic Research And Its Insurance Program. Includes Bibliographical References And Indexes. Is it possible that the insurance and reinsurance industries cannot handle a major catastrophe? Ten years ago, the notion that the overall cost of a single catastrophic event might exceed 1 0 billion was unthinkable. With ever increasing property-casualty risks and unabated growth in hazard-prone areas, insurers and reinsurers now envision the possibility of disaster losses of. 1 00 billion in the United States. Against this backdrop, the capitalization of the insurance and reinsurance industries has become a crucial concern. While it remains unlikely that a single event might entirely b