The Structure of the Global Reinsurance Market: An Analysis of Efficiency, Scale, and Scope

Item Type Journal paper
Abstract

We estimate economies of scale and scope as well as cost and revenue efficiency to explain the structure of the global reinsurance market, where large reinsurers dominate but both diversified and specialized reinsurers are competitive. The costs and benefits of size and product diversification are particularly relevant to the reinsurance industry, as risk diversification is central to the industry's business model. We find that reinsurers with total assets less than USD 2.9 billion exhibit scale economies, while those with total assets greater than USD 15.5 billion do not. Large reinsurers are characterized by high cost efficiency, while small reinsurers exhibit superior efficiency only when specialized. Large reinsurers also exhibit revenue scope economies when operating both life and nonlife reinsurance. Moreover, the evidence is in line with the efficient structure hypothesis: cost-efficient reinsurers can charge lower prices without sacrificing profitability.

Authors Biener, Christian; Eling, Martin & Jia, Ruo
Journal or Publication Title Journal of Banking and Finance
Language English
Keywords Insurance; Cost efficiency; Market structure; Economies of scale; Economies of scope; Data envelopment analysis
Subjects business studies
HSG Classification contribution to scientific community
Refereed No
Date April 2017
Publisher Elsevier North-Holland
Place of Publication Amsterdam
Series Name School of Finance Working Paper Series
Volume 77
Page Range 213-229
ISSN 0378-4266
ISSN-Digital 1872-6372
Publisher DOI 10.1016/j.jbankfin.2017.01.017
Depositing User PD Dr. Christian Biener
Date Deposited 09 Mar 2015 13:45
Last Modified 30 Oct 2018 17:20
URI: https://www.alexandria.unisg.ch/publications/239765

Download

Full text not available from this repository.

Citation

Biener, Christian; Eling, Martin & Jia, Ruo (2017) The Structure of the Global Reinsurance Market: An Analysis of Efficiency, Scale, and Scope. Journal of Banking and Finance, 77 213-229. ISSN 0378-4266

Statistics

https://www.alexandria.unisg.ch/id/eprint/239765
Edit item Edit item
Feedback?