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 owner-manager 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.
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Metadaten
Author:Christian Laux, Alexander Muermann
URN:urn:nbn:de:hebis:30-50569
Parent Title (English):Universität Frankfurt am Main. Fachbereich Wirtschaftswissenschaften: [Working paper series / Finance and accounting] Working paper series, Finance & Accounting ; No. 180
Series (Serial Number):Working paper series / Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting (180)
Publisher:Univ., Fachbereich Wirtschaftswiss.
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2007
Year of first Publication:2007
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2007/10/26
Tag:capital; default; insurance; owner-manager conflict; ownership structure
SWD-Keyword:Gegenseitigkeit-Versicherung; Versicherungsaktiengesellschaft
Issue:Version April 2007
Pagenumber:40
HeBIS PPN:194393836
Institutes:Wirtschaftswissenschaften
Dewey Decimal Classification:330 Wirtschaft
JEL-Classification:G22 Insurance; Insurance Companies
G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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