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. 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
| Author: | Christian LauxORCiDGND, Alexander Muermann |
|---|---|
| URN: | urn:nbn:de:hebis:30-38003 |
| Parent Title (German): | Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2006,26 |
| Series (Serial Number): | CFS working paper series (2006, 26) |
| Document Type: | Working Paper |
| Language: | English |
| Year of Completion: | 2006 |
| Year of first Publication: | 2006 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2007/02/23 |
| Tag: | capital; default; insurance; owner-manager conflict; ownership structure |
| GND Keyword: | Versicherungsverein auf Gegenseitigkeit |
| Issue: | Version October 2006 |
| Page Number: | 37 |
| HeBIS-PPN: | 190639423 |
| Institutes: | Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Licence (German): |  Deutsches Urheberrecht |
