A dynamic model of extreme risk coverage: resilience and efficiency in the global reinsurance market

Policy research working paper 5807:

This paper presents a dynamic model of the reinsurance market for catastrophe risks. It (i) briefly describes the main characteristics of the reinsurance market for natural catastrophe risks; (ii) presents the underlying economic model and its main assumptions and limits; (iii) describes the modeling approach and details the data used for the calibration; (iv) proposes a reference scenario and compares it with the stylised facts described in the literature; (v) provides a sensitivity analysis on model parameters; and (vi) discusses the regulation trade-off between efficiency and resilience.