An empirical assessment of reinsurance risk.

Abstract: We analyse the effect of failing reinsurance cover on the stability of Dutch insurers. As insurers often reinsure themselves with other (re)insurers, a firm''s loss could spread contagiously through the sector. Using a unique and confidential data set on reinsurance exposures, we gain insight into the reinsurance market structure and perform a scenario analysis to measure contagion risks. Considering entities on a standalone basis, we find no evidence of systemic risk in the Netherlands, even if multiple reinsurance companies fail simultaneously. At group level our analysis points to the contagion risk of in-house reinsurance structures, given that such in-house reinsurance parties are generally not higher capitalised than other group members. [Copyright &y& Elsevier]