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<p><?tk 4?>This study models competing reinsurance syndicates in a common-value setting. Under the follow-the-lead practice, the lead reinsurer makes an offer to the client, while followers provide capacity at the single unit price set at the tender stage. To reconcile regulators’ call for more independent bidding by non-leads with participants’ informational constraints, we consider a retrocession mechanism in which the lead underwrites the contract and later cedes part of the risk with offer disclosure. In the follow-the-lead practice, lead reinsurers shade their offers to avoid the winner’s curse, whereas retrocession encourages more aggressive offers, redistributes surplus, and benefits clients through an information transmission channel.</p>

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Auction design for reinsurance

  • 期刊论文

  • 发表日期：

    2026年2月23日

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  • Chang Liu

摘要

This study models competing reinsurance syndicates in a common-value setting. Under the follow-the-lead practice, the lead reinsurer makes an offer to the client, while followers provide capacity at the single unit price set at the tender stage. To reconcile regulators’ call for more independent bidding by non-leads with participants’ informational constraints, we consider a retrocession mechanism in which the lead underwrites the contract and later cedes part of the risk with offer disclosure. In the follow-the-lead practice, lead reinsurers shade their offers to avoid the winner’s curse, whereas retrocession encourages more aggressive offers, redistributes surplus, and benefits clients through an information transmission channel.