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Making a Market for Acts of GodThe Practice of Risk Trading in the Global Reinsurance Industry$
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Paula Jarzabkowski, Rebecca Bednarek, and Paul Spee

Print publication date: 2015

Print ISBN-13: 9780199664764

Published to Oxford Scholarship Online: April 2015

DOI: 10.1093/acprof:oso/9780199664764.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (www.oxfordscholarship.com). (c) Copyright Oxford University Press, 2019. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 16 September 2019

Transforming Disasters into Tradable Deals

Transforming Disasters into Tradable Deals

Chapter:
(p.59) 3 Transforming Disasters into Tradable Deals
Source:
Making a Market for Acts of God
Author(s):

Paula Jarzabkowski

Rebecca Bednarek

Paul Spee

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199664764.003.0003

Chapter 3 demonstrates how the risk of disasters is turned into financial deals that can be traded within the reinsurance market. We show how underwriters calculate the risk on deals using widespread statistical models (technicalizing) even as they acknowledge that these models are flawed, so supplementing their evaluation with their individual knowledge of the physical properties of such risks (contextualizing), which they factor into their evaluation of price. This chapter focuses on U.S. Property Catastrophe deals, which are the dominant and most modelable type of reinsurance risk. We bring deal evaluation to life by following John, a U.S. Property underwriter, from the conferences where he meets clients with risk portfolios as diverse as Californian earthquake and bushfire, Midwest tornado, and Gulf of Mexico hurricane, to his office in Bermuda where he evaluates these risks and makes decisions to use his firm’s capital to cover them.

Keywords:   financial market, risk transfer, social practice theory, relationality, statistical models, calculation, evaluation, Property Catastrophe risk, marketization, global ethnography

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