AccessMyLibrary provides FREE access to over 30 million articles from top publications available through your library.
Create a link to this page
Copy and paste this link tag into your Web page or blog:
Comment - Broadening your horizons.
(From Reinsurance)
Byline: Sal Zaffino, chief executive of global reinsurance intermediary Guy
In finance, diversification is a widely accepted principle. If all of an investor's funds are invested in one asset class, the investor runs the risk of total ruin if that asset fails.
The recent example of the burst of the technology stock bubble, where some individuals held practically all of their nest eggs in a few "hot" tech stocks, bears testimony to the pain suffered by market players who did not follow the diversification principle.
When applied to reinsurance, this principle suggests that cedants should spread their reinsurance programs among a variety of reinsurers to avoid the risk of default on their reinsurance contracts - and of grievous financial loss - in the event of reinsurance company failures.
Diversification reduces cedants' exposure to reinsurance company default risk. This is probably the single most important reason for insurers to diversify their reinsurance placements. However, insurers use diversification for a number of other reasons.
For example, many reinsurance placements are so large that they require the participation of a sizeable number of reinsurers.
- Does reinsurance need reinsurers?
- Magazine article from: Journal of Risk and Insurance Plantin, Guillaume March 1, 2006 700+ words
...market portfolio. Professional reinsurers do indeed hold very diversified...apart from the introduction of reinsurers' default risk. (2) The second framework...approach has emphasized that reinsurers, because of their expertise...
- Risk management, capital budgeting, and capital structure policy for insurers...
- Magazine article from: Journal of Risk and Insurance Froot, Kenneth A. June 1, 2007 700+ words
...decisions facing insurers and reinsurers. The model incorporates...features make insurers and reinsurers especially sensitive...to a contract with no default risk, a contract with 1 percent independent default risk is priced 20-30 percent...
- Market sees niche for proposed reinsurer, once 'MuniRe' finds $100 million and...
- Magazine article from: The Bond Buyer Dickson, Steven August 7, 1992 700+ words
...side for a new reinsurer," said Daniel...major monoline reinsurers with whom MuniRe...said another reinsurer would probably...adequately against default risk. Both Enhance...the first time a reinsurer has earned that...existing insurers and reinsurers can no longer cover...
- 3 Are the Fama-French factors proxying default risk?(Eugene Fama and Kenneth...
- Magazine article from: Australian Journal of Management Gharghori, Philip Chan, Howard Faff, Robert December 1, 2007 700+ words
...French factors, SMB and HML, are proxying for default risk. To assess the default risk hypothesis, we augment the CAPM and the Fama...approach. Our key findings are that: 1) default risk is not priced in equity returns; and, 2...
- LOAN DEFAULT RISK.
- Magazine article from: Journal of Banking and Financial Services SIMPSON, JOHN April 1, 2001 700+ words
...NOT BE SUCH A COMPELLING FACTOR Is the default risk of borrowing relevant to the time to...recent investigation of the perceived default risk of borrowers. The aim of the exercise...of influence of the above factors on default risk. Traditional factors Traditionally...
- Fitch: ABCP Default Risk Analysis Advances.
- Press release article from: Business Wire July 2, 2007 700+ words
...out important factors affecting the default risk and have thus become outdated, according...portfolio characteristics that affect the default risk. And while some approaches may impose...Director, Fitch Ratings. 'First to default risk increases as more assets are combined...
- Original-issue systematic and default risk pricing efficiency of...
- Magazine article from: Journal of Risk and Insurance Spahr, Ronald W. Schwebach, Robert G. Sunderman, Mark A. December 1, 2002 700+ words
...bond primary markets efficiently price default risk and that other types of risk are priced...risk premiums reflect only expected default risk or whether other orthogonal factors...traditionally have been defined either as default risk or systematic risk may result in common...
- Vector Takes On ABCP Default Risk.(asset-backed commercial paper )
- Newspaper article from: Asset Securitization Report July 2, 2007 700+ words
...programs fall short of quantifying the true default risk associated with such portfolios. These...characteristics that affect the portfolio default risk. Specifically, they do not fully account...included in the program to determine the default risk for a given ABCP portfolio. When ...
