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 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.
| Author: | Christian LauxORCiDGND, 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: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2007/10/26 |
| Tag: | capital; default; insurance; owner-manager conflict; ownership structure |
| GND Keyword: | Gegenseitigkeit-Versicherung; Versicherungsaktiengesellschaft |
| Issue: | Version April 2007 |
| Page Number: | 40 |
| HeBIS-PPN: | 194393836 |
| Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Licence (German): |  Deutsches Urheberrecht |
