Arbeitspapier
Filtern
Erscheinungsjahr
- 2007 (1) (entfernen)
Dokumenttyp
- Arbeitspapier (1) (entfernen)
Sprache
- Englisch (1)
Volltext vorhanden
- ja (1)
Gehört zur Bibliographie
- nein (1)
Schlagworte
- insurance (1) (entfernen)
Institut
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.