The Pricing of U.S. Catastrophe Reinsurance - Chapter 5 of "The Financing of Catastrophe Risk"

The price of catastrophe reinsurance in the United States has fluctuated markedly in recent years. These fluctuations are commonly associated with the pattern of catastrophe occurrences. For example, catastrophe losses during the period 1992-94 totaled 38.6 billion in 1994 dollars, exceeding the cumulative total of losses during 1949-91 of 34.6 billion. During this three-year period, prices on catastrophe-reinsurance cover more than doubled and then began to decline thereafter. What drives such changes in price? Does the demand for reinsurance shift, does the supply of reinsurance capital change, or do both occur?