
on Insurance Economics 
Issue of 2005‒06‒27
one paper chosen by Soumitra K Mallick Indian Institute of Social Welfare and Bussiness Management 
By:  Michael R. Powers (Temple University); Martin Shubik (Cowles Foundation, Yale University) 
Abstract:  In previous work, the current 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 paper, we show analytically that, for large numbers of primary insurers, this mathematical expression provides a "squareroot rule"; i.e., the optimal number of reinsurers in a market is given asymptotically by the square root of the total number of primary insurers. We note further that an analogous “fourthroot rule” applies to markets for retrocession (the reinsurance of reinsurance). 
Keywords:  Primary insurance, Reinsurance, Market size, Squareroot rule 
JEL:  C72 G22 
Date:  2005–06 
URL:  http://d.repec.org/n?u=RePEc:cwl:cwldpp:1521&r=ias 