On the Corporate Demand for Insurance: Evidence from the Reinsurance Market

Significant attention has focused on the determinants of corporate insurance purchases. While this analysis generally involves observable firm characteristics, its implications have been untested. This is primarily due to the difficulty in obtaining data on corporate insurance purchases. The authors examine one industry where data on insurance purchases are systematically reported: the insurance industry. A reinsurance contract is an insurance policy purchased by one insurance company from another. Their examination of reinsurance purchases by property/casualty insurance companies provides strong evidence on the effects of ownership structure, size, geographic concentration, and line-of-business concentration on the demand for reinsurance.