Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/22452
Authors: 
Thomann, Christian
von der Schulenburg, Johann-Matthias
Year of Publication: 
2006
Series/Report no.: 
Diskussionspapiere des Fachbereichs Wirtschaftswissenschaften, Universität Hannover 340
Abstract: 
In our article we consider insurance as a means of allocating terrorism risk. Terrorism poses a significant challenge for insurers worldwide. In terms of possible losses it fits into the same category as earthquakes and hurricanes. Yet as a result of the uncertainty surrounding these risks private markets face significant difficulties in providing insurance for it. In the insurance industry costly risk bearing can explain the supply of capacity risks. Corporate risk management theory provides reasons why transaction costs can motivate firms to purchase insurance. In the context of these tightly connected theories we derive models for both the supply of terrorism reinsurance and the demand for terrorism insurance. Using two datasets from the German terrorism insurer we estimate models on how corporations in Germany employ government sponsored insurance to manage their terrorism risk and on the factors that determine the supply for private market terrorism reinsurance.
Subjects: 
Terrorism
Insurance
Risk Allocation
Regulation
JEL: 
D61
G32
G22
Document Type: 
Working Paper

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