Dynamic Investment-Driven Insurance Pricing and Optimal Regulation
Abstrak
This paper analyzes the equilibrium of insurance market in a dynamic setting, focusing on the interaction between insurers' underwriting and investment strategies. Three possible equilibrium outcomes are identified: a positive insurance market, a zero insurance market, and market failure. Our findings reveal why insurers may rationally accept underwriting losses by setting a negative safety loading while relying on investment profits, particularly when there is a negative correlation between insurance gains and financial returns. Additionally, we explore the impact of regulatory frictions, showing that while imposing a cost on investment can enhance social welfare under certain conditions, it may not always be necessary.
Penulis (3)
Bingzheng Chen
Zongxia Liang
Shunzhi Pang
Akses Cepat
- Tahun Terbit
- 2024
- Bahasa
- en
- Sumber Database
- arXiv
- Akses
- Open Access ✓