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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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One Firm’s Trash is Another’s Treasure

One Firm’s Trash is Another’s Treasure

Competing in a Consensus Market

Chapter:
(p.124) 5 One Firm’s Trash is Another’s Treasure
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/9780199664764.003.0005

Chapter 5 examines how reinsurance firms compete given that they bear risk collectively at a consensus price. The chapter shows that reinsurers compete indirectly to shape the consensus price at which a deal will trade to the entire market, and for shares of the deals they consider most valuable. However, what constitutes a valuable deal, and therefore how hard any particular firm will compete for it, varies widely based on their different risk appetites. The chapter explains how each firm’s risk-appetite is made up of different beliefs about diversification, relationship longevity, and capital availability, and that this has consequences for how they evaluate, quote, and compete for deals. This risk-appetite changes dynamically, right up to the moment the market “closes” on any particular deal. The chapter illustrates this competitive process with an example of four reinsurance firms competing very differently for the same large deal.

Keywords:   financial markets, risk transfer, social practice theory, relationality, competition, consensus price, risk appetite, diversification, evaluation, global ethnography

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