Purpose – The purpose of this paper is to consider the problem of allocating responsibility for risk through a simple classroom vignette that illustrates some of the difficulties encountered in more complex real-world scenarios. Design/methodology/approach – After considering a number of ad hoc allocation methods, this study focuses on the Shapley and Aumann-Shapley values from cooperative game theory. Findings – Shows that the Aumann-Shapley value provides a useful tool for allocating risk in a real-world insurance context, and therefore may be used to distribute capital (surplus) and premium loadings. Originality/value – The paper offers insights into both the challenges of the risk-allocation problem and its proposed solutions.
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