ABSTRACT: Insurance-industry accounts of the liability insurance crisis of the mid-1980s often cite disruption of supply in reinsurance markets as an important contributing factor. Economic theories of the crisis have not explored this explanation for the severity of the crisis. This article investigates the extent to which events in reinsurance markets affected liability insurance market outcomes. It documents significant shocks to reinsurance supply in the early 1980s and finds evidence of subsequent disruptions to the price and availability of reinsurance. Regression analysis of liability insurance profitability over the time period supports the hypothesis that problems in reinsurance markets played an important role in the crisis. Copyright 1992 by Kluwer Academic PublishersA wonky post for some relevance for FNQ in recent years beyond the pathetic populism from our media and Warren Entsch!
Frances Coppola @Frances_Coppola
Reinsurance spirals develop when everyone is trying to lay off risks. Eurodollar spiral I wrote about was the same - everyone avoiding risk