The Liability Regime of Insurance Pools and Its Impact on Pricing
Journal
North American Actuarial Journal
ISSN
1092-0277
Type
journal article
Date Issued
2018
Author(s)
Abstract (De)
This work formally derives fairly priced premiums for the policyholder of an insurance pool and the risk-adequate equity contributions of the pool insurers’ equity holders in a contingent claims approach. The approach distinguishes between two liability regimes: joint liability and several liability. These regimes regulate the pool’s indemnification when one or more of the pool insurers cannot meet their full obligations because of insolvency. Joint liability is deduced to be the preferable regime for the policyholder in cost-savings terms if corporate income taxation is introduced as a market friction. This regime advantage vanishes if the pool insurers’ asset correlation is substantial or if their risk sharing becomes unbalanced. Additionally, we address risk-shifting problems and their regime-dependent effects on both stakeholder groups.
Language
English
HSG Classification
contribution to scientific community
HSG Profile Area
SOF - System-wide Risk in the Financial System
Refereed
Yes
Publisher
Taylor & Francis
Volume
22
Number
4
Start page
533
End page
553
Pages
21
Subject(s)
Division(s)
Eprints ID
266904