Mutual versus stock insurers : fair premium, capital and solvency

Mutual insurance companies and stock insurance companies are different forms of organized risk sharing: policyholders and owners are two distinct groups in a stock insurer, while they are one and the same in a mutual. Th
Mutual insurance companies and stock insurance companies are different forms of organized risk sharing: policyholders and owners are two distinct groups in a stock insurer, while they are one and the same in a mutual. This distinction is relevant to raising capital, selling policies, and sharing risk in the presence of financial distress. Up-front capital is necessary for a stock insurer to offer insurance at a fair premium, but not for a mutual. In the presence of an ownermanager conflict, holding capital is costly. Free-rider and commitment problems limit the degree of capitalization that a stock insurer can obtain. The mutual form, by tying sales of policies to the provision of capital, can overcome these problems at the potential cost of less diversified owners. JEL Classification: G22, G32
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Metadaten
Author:Christian Laux, Alexander Muermann
URN:urn:nbn:de:hebis:30-38003
Series (Serial Number):CFS working paper series (2006, 26)
Document Type:Working Paper
Language:English
Date of Publication (online):2007/02/23
Year of first Publication:2006
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2007/02/23
SWD-Keyword:Capital ; Default; Insurance ; Ownership Structure ; Qwner-Manager Conflict
HeBIS PPN:190639423
Institutes:Center for Financial Studies (CFS)
Dewey Decimal Classification:330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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