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Insurance demand and welfare-maximizing risk capital—Some hints for the regulator in the case of exponential preferences and exponential claims

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  • Burren, Daniel
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    Abstract

    We propose two models to analyze welfare-maximizing capital requirements for insurance companies considering that capital is costly and therefore affecting the premium. Within a continuous-time model, we derive insurance demand and welfare as a function of personal wealth, the insurance company’s wealth, and the claims process, and compare them to their counterparts in a static model. Besides discussing welfare-maximizing capital, we provide some new insights on insurance demand.

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    Bibliographic Info

    Article provided by Elsevier in its journal Insurance: Mathematics and Economics.

    Volume (Year): 53 (2013)
    Issue (Month): 3 ()
    Pages: 551-568

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    Handle: RePEc:eee:insuma:v:53:y:2013:i:3:p:551-568

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    Web page: http://www.elsevier.com/locate/inca/505554

    Related research

    Keywords: Welfare-maximizing risk capital; Insurance demand; Risk theory; Optimal stochastic control;

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