On the Corporate Demand for Insurance: Evidence from the Reinsurance Market

TLDR

Corporate insurance purchases have attracted attention, yet their determinants remain underexplored because data are hard to obtain, especially in the reinsurance market where contracts are insurance policies bought by one insurer from another. The study uses the insurance industry, where reinsurance purchases are systematically reported, as the empirical setting. Reinsurance purchases by property/casualty insurers reveal that ownership structure, firm size, geographic concentration, and line‑of‑business concentration significantly influence reinsurance demand. © 1990 University of Chicago.

Abstract

Significant attention has focused on the determinants of corporate insurance purchases. While this analysis generally involves observable firm characteristics, its implications have been untested. This is primarily due to the difficulty in obtaining data on corporate insurance purchases. The authors examine one industry where data on insurance purchases are systematically reported: the insurance industry. A reinsurance contract is an insurance policy purchased by one insurance company from another. Their examination of reinsurance purchases by property/casualty insurance companies provides strong evidence on the effects of ownership structure, size, geographic concentration, and line-of-business concentration on the demand for reinsurance. Copyright 1990 by the University of Chicago.