Making a Market for Acts of God: The Practice of Risk Trading in the Global Reinsurance Industry by Paula Jarzabkowski
Reinsurance is a financial market that trades in unforeseen and destructive disaster risk - such as Hurricane Katrina, Tohoku earthquake and tsunami and terrorist attacks on the World Trade Center.…
Making a Market for Acts of God synopsis
Reinsurance is a financial market that trades in unforeseen and destructive disaster risk - such as Hurricane Katrina, Tohoku earthquake and tsunami and terrorist attacks on the World Trade Center. Such disasters are increasing in frequency and intensity, with the cost of their losses rapidly increasing.
Reinsurance guarantees insurance companies, enabling them to pay claims arising from such losses. It is therefore a market mechanism that forms an important part of the social and economic safety net, helping to capture pieces after disasters.
However, how are the risks of such disasters calculated and traded in the globalmarket? This book brings life into the reinsurancemarket with real live stories emerging from an ethnographic study of "flying on the wall" for the globalreinsuranceindustry over three annual cycles. Insurers remained silent on insurers around the world as they traded risks through multiple disasters.
For example, this book takes readers into the desperate hours of Japanese risk pricing in March 2011, while the devastating effects of the Tohoku earthquake unfold. To show how the market works, the book presents authentic tales gathered from the notes of reinsurance companies in Bermuda and Lloyd's in London, continental Europe and Southeast Asia, assessing prices and competing for various risks as part of their daily practices.
Understanding how this market works for disasters has never been more important given the impact of climate change and increased global connectivity, where flooding in a country can lead to supply chain losses around the world. The authors develop a new concept of how global markets work, leading to scholarships and challenging current thinking about how financial markets trade in intangible assets such as risk.
This book will be useful for readers interested in disaster markets, insurance, reinsurance, financial markets and academics interested in practicing financial markets specifically or practicing strategy and organizations in general.
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