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 dollars 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. This book explores the disturbing yet realistic assumption that a large catastrophic event is inevitable. The essays aim to offer means of both reassessing and raising the level of preparedness throughout the insurance and reinsurance industries.
Acknowledgments Introduction Kenneth A. Froot 1. Insurer Demand for Catastrophe Reinsurance Anne Gron Comment: Steven F. Goldberg Comment: Raghuram Rajan 2. Alternative Means of Redistributing Catastrophic Risk in a National Risk Management System Christopher M. Lewis and Kevin C. Murdock Comment: Peter Diamond Comment: Paolo M. Pellegrini 3. Pricing Excess-of-Loss Reinsurance Contracts against Catastrophic Loss J. David Cummins, Christopher M. Lewis, and Richard D. Phillips Comment: Sanjiv Ranjan Das Comment: James A. Tilley 4. Challenges Facing the Insurance Industry in Managing Catastrophic Risks Paul R. Kleindorfer and Howard C. Kunreuther Comment: James R. Garven Comment: Dwight Jaffee 5. The Pricing of U.S. Catastrophe Reinsurance Kenneth A. Froot and Paul G. J. O'Connell Comment: Jeremy C. Stein 6. Reinsurance for Catastrophes and Cataclysms David M. Cutler and Richard J. Zeckhauser Comment: John H. Cochrane 7. The Influence of Income Tax Rules on Insurance Reserves David F. Bradford and Kyle D. Logue Comment: Ross J. Davidson Jr. Comment: James R. Hines Jr. 8. Courting Disaster? The Transformation of Federal Disaster Policy since 1803 David A. Moss Comment: Clement S. Dwyer Jr. Comment: R. Glenn Hubbard 9. The Moral Hazard of Insuring the Insurers James G. Bohn and Brian J. Hall Comment: Christopher M. McGhee Comment: David Scharfstein 10. Index Hedge Performance: Insurer Market Penetration and Basis Risk John A. Major Comment: Andre F. Perold 11. Panel Discussions Contributors Author Index Subject Index