Solvency Regulation and the Property-Liability "Insurance Cycle."
AbstractFluctuations in the supply of property-liability insurance may be exacerbated by regulation. To limit insolvencies, regulators constrain insurers against writing an excessive quantity of insurance relative to net worth. Revenue is used as a measure of aggregate quantity. In a competitive market with inelastic demand, a constraint on the ratio of revenue to net worth yields a catastrophe process for price dynamics. Indirect evidence supports the argument that the current form of solvency regulation is destabilizing. Copyright 1991 by Oxford University Press.
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Bibliographic InfoArticle provided by Western Economic Association International in its journal Economic Inquiry.
Volume (Year): 29 (1991)
Issue (Month): 3 (July)
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- M. Martin Boyer & Jörg Schiller, 2003. "Merging Automobile Insurance Regulatory Bodies: The Case of Atlantic Canada," CIRANO Working Papers 2003s-70, CIRANO.
- Harin, Alexander, 2011. "The theorem of existence of the ruptures in probability scale and the basic question of insurance," MPRA Paper 34780, University Library of Munich, Germany.
- Strauss, Jason, 2007. "Price Regulation, Market Exit, and Financial Leverage of Canadian Property-Liability Insurers," MPRA Paper 11212, University Library of Munich, Germany, revised 28 Oct 2008.
- Boyer, M. Martin & Schiller, Jörg, 2003. "Merging automobile regulatory bodies: The case of Atlantic Canada," Working Papers on Risk and Insurance 11, University of Hamburg, Institute for Risk and Insurance.
- Denis Kessler, 2005. "La fin du cycle traditionnel en assurance et réassurance de dommages ?," Revue d'Économie Financière, Programme National Persée, vol. 80(3), pages 159-170.
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