Research Conducted at University of Minnesota Twin Cities Has Provided New Information about Economics (Insurer Risk and Public Risk-sharing: Quantifying the Value of Reinsurance): Economics

2026 JUL 31 (NewsRx) -- By a News Reporter-Staff News Editor at Insurance Daily News -- Current study results on Economics have been published. According to news reporting originating from Minneapolis, Minnesota, by NewsRx correspondents, research stated, “We study the role of public risk-sharing in markets where firms face substantial cost uncertainty, focusing on public reinsurance in health insurance. We develop a model where insurers internalize cost uncertainty through risk charges that raise effective marginal costs and create a role for reinsurance.”

Financial support for this research came from Center of Industrial Organization at Northwestern University.

Our news editors obtained a quote from the research from the University of Minnesota Twin Cities, “Public reinsurance lowers both expected costs and cost volatility, particularly for smaller insurers, reducing prices and enhancing competition. Using an event study of staggered state-level reinsurance programs, we show that public reinsurance leads insurers to lower prices and private reinsurance purchases, benefiting financially constrained insurers the most. Structural estimates indicate that risk charges account for a substantial share of the premium-cost wedge and highlight public reinsurance’s comparative advantage over premium subsidies by providing risk protection and enhancing competition.”

According to the news editors, the research concluded: “Our results underscore the importance of accounting for firms’ risk exposure in policy design and provide a general framework for understanding public risk-sharing policies.”

This research has been peer-reviewed.

For more information on this research see: Insurer Risk and Public Risk-sharing: Quantifying the Value of Reinsurance. Review of Economic Studies, 2026. Review of Economic Studies can be contacted at: Oxford Univ Press, Great Clarendon St, Oxford OX2 6DP, England. (Oxford University Press - http://www.oup.com/; Review of Economic Studies - restud.oxfordjournals.org)

The news editors report that additional information may be obtained by contacting Anran Li, University of Minnesota Twin Cities, Dept. of Economics, Minneapolis, MN 55455, United States.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1093/restud/rdag063. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

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