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 number of primary insurers (see Powers and Shubik, 2001).In the current article, we show analytically that, for large numbers of primary Small Animal Habitat Accessories insurers, this mathematical expression provides a "square-root rule"; i.e., the optimal number of Wheel Adapter reinsurers in a market is given 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).