The Spiral in the Catastrophe Retrocessional Market

The risk of a major hurricane or earthquake is spread throughout the world by the property catastrophe reinsurance market. This forms a complicated web of contracts with many reinsures reinsuring little pieces of each other’s catastrophe covers. Following Hurricane Alicia in 1983, the market began to notice an anomalous effect called the "London market spiral". This paper will examine: An overview of the catastrophe market, A simple example of the operation of the spiral, and Under what conditions the spiral would stop, and how a loss gets distributed among market participants. Reinsurance Research