A "square-root rule" for reinsurance

A "square-root rule" for reinsurance

Blog Article

In previous work, the authors derived a mathematical expression for the optimal (or "saturation") number of reinsurers for a given click here number of primary insurers (see Powers and Shubik, 2001).In the current article, we show analytically that, for large numbers of primary insurers, this mathematical expression provides a "square-root rule"; i.e., the optimal number of reinsurers in a market is given nacrack.com asymptotically by the square root of the total number of primary insurers.

We note further that an analogous "fourth-root rule" applies to markets for retrocession (the reinsurance of reinsurance).