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Risk sharing under the dominant peer‐to‐peer property and casualty insurance business models

Author

Listed:
  • Denuit, Michel

    (Université catholique de Louvain, LIDAM/ISBA, Belgium)

  • Robert, Christian Y.

Abstract

This paper purposes to formalize the three business models dominating peer-to-peer (P2P) property and casualty insurance: the self-governing model, the broker model, and the carrier model. The former one develops outside the insurance market whereas the latter ones may originate from the insurance industry, by partnering with an existing company or by issuing a new generation of participating insurance policies where part of the risk is shared within a community and higher losses, exceeding the community's risk-bearing capacity are covered by an insurance or reinsurance company. The present paper proposes an actuarial modeling based on conditional mean risk sharing, to support the development of this new P2P insurance offer under each of the three business models. In addition, several specific questions are also addressed in the self-governing model. Considering an economic agent who has to select the optimal pool for a risk to be shared with other participants, it is shown that uniform comparison of the Lorenz or concentration curves associated to the respective total losses of the pools under consideration allows the agent to decide which pool is preferable.

Suggested Citation

  • Denuit, Michel & Robert, Christian Y., 2021. "Risk sharing under the dominant peer‐to‐peer property and casualty insurance business models," LIDAM Reprints ISBA 2021020, Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA).
    • Handle: RePEc:aiz:louvar:2021020
    DOI: https://doi.org/10.1111/rmir.12180
    Note: In: Risk Management and Insurance Review, 24, 2, 181-205, 2021
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    Citations

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    Cited by:

    1. Denuit, Michel & Robert, Christian Y., 2023. "From risk reduction to risk elimination by conditional mean risk sharing of independent losses," Insurance: Mathematics and Economics, Elsevier, vol. 108(C), pages 46-59.
    2. Denuit, Michel & Hieber, Peter & Robert, Christian Y., 2021. "Mortality credits within large survivor funds," LIDAM Discussion Papers ISBA 2021038, Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA).
    3. Michel Denuit & Jan Dhaene & Christian Y. Robert, 2022. "Risk‐sharing rules and their properties, with applications to peer‐to‐peer insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 89(3), pages 615-667, September.
    4. Denuit, Michel & Robert, Christian Y., 2023. "Endowment contingency funds for mutual aid and public financing," LIDAM Discussion Papers ISBA 2023009, Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA).

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