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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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United We Stand, Divided We Fall

United We Stand, Divided We Fall

Bearing Risk Collectively

(p.25) 2 United We Stand, Divided We Fall
Making a Market for Acts of God

Paula Jarzabkowski

Rebecca Bednarek

Paul Spee

Oxford University Press

Chapter 2 shows how reinsurers, despite being competitors, bear risk collectively by taking shares of different deals at a consensus or common price, as a form of protection from unpredictable disasters with enormous losses. Unusually, and counter to other markets, the chapter explains that market cycles, in which price fluctuates between hard (high-price) and soft (low-price) cycles, are not evidence of boom and bust dynamics but rather help to stabilize the market in the face of such uncertainty. It shows the common practices of quoting deals and maintaining business relationships across market cycles, through which reinsurance underwriters around the world are able to collectively price and bear risk, despite not being directly in contact with each other. The chapter brings these principles of collective risk-bearing to life with an evocative tale of how underwriters shaped the market cycle in response to the Thai flood that disrupted global supply chains in 2011.

Keywords:   financial markets, social practice theory, relationality, market cycle, consensus price, opportunism and restraint, disaster events, long-term relationships, collective risk bearing, global ethnography

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