Who benefits from building insurance groups? A welfare analysis based on optimal group risk management
- This paper compares the shareholder-value-maximizing capital structure and pricing policy of insurance groups against that of stand-alone insurers. Groups can utilise intra-group risk diversification by means of capital and risk transfer instruments. We show that using these instruments enables the group to offer insurance with less default risk and at lower premiums than is optimal for standalone insurers. We also take into account that shareholders of groups could find it more difficult to prevent inefficient overinvestment or cross-subsidisation, which we model by higher dead-weight costs of carrying capital. The tradeoff between risk diversification on the one hand and higher dead-weight costs on the other can result in group building being beneficial for shareholders but detrimental for policyholders.
| Author: | Sebastian SchlütterGND, Helmut GründlGND |
|---|---|
| URN: | urn:nbn:de:hebis:30:3-771162 |
| DOI: | https://doi.org/10.2139/ssrn.1948485 |
| Series (Serial Number): | ICIR Working Paper Series (No. 8/11) |
| Publisher: | International Center for Insurance Regulation |
| Place of publication: | Frankfurt am Main |
| Document Type: | Working Paper |
| Language: | English |
| Year of Completion: | 2011 |
| Year of first Publication: | 2011 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2024/03/28 |
| Tag: | consumer protection; insurance groups; insurance pricing; insurer default risk |
| Page Number: | 24 |
| HeBIS-PPN: | 516922688 |
| Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
| Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF) | |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Sammlungen: | Universitätspublikationen |
| Licence (German): |  Deutsches Urheberrecht |
