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How Can Insurance Companies Compete With MutualInsurers? The Role of Commitment

  • Renaud Bourlès

    ()

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579)

The aim of this paper is to analyze the impact of the existence of mutual firms on the behavior of insurance companies and more precisely to study in which situations an insurance company can enter a market controlled by mutual arrangements. Our approach differs from the existing literature as we integrate the investment choices of the insurance company and the fact that, because it commits on a fix contract, it can become insolvent. In such a situation we are able tocharacterize the unique optimal choices of the monopolistic company and the conditions favoringits appearance.

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Paper provided by HAL in its series Working Papers with number halshs-00410765.

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Date of creation: 2006
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Handle: RePEc:hal:wpaper:halshs-00410765
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  1. Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 630-49, November.
  2. Garance Genicot & Debraj Ray, 2003. "Group Formation in Risk--Sharing Arrangements," Review of Economic Studies, Wiley Blackwell, vol. 70(1), pages 87-113, January.
  3. Hansmann, Henry, 1985. "The Organization of Insurance Companies: Mutual versus Stock," Journal of Law, Economics and Organization, Oxford University Press, vol. 1(1), pages 125-53, Spring.
  4. Raj Chetty, 2006. "A Bound on Risk Aversion Using Labor Supply Elasticities," NBER Working Papers 12067, National Bureau of Economic Research, Inc.
  5. Laux, Christian & Muermann, Alexander, 2006. "Mutual versus stock insurers: Fair premium, capital, and solvency," CFS Working Paper Series 2006/26, Center for Financial Studies (CFS).
  6. Lamm-Tennant, Joan & Starks, Laura T, 1993. "Stock versus Mutual Ownership Structures: The Risk Implications," The Journal of Business, University of Chicago Press, vol. 66(1), pages 29-46, January.
  7. David Mayers & Clifford Smith, 2002. "Ownership Structure and Control: Property-Casualty Insurer Conversion to Stock Charter," Journal of Financial Services Research, Springer, vol. 21(1), pages 117-144, February.
  8. Smith, Bruce D & Stutzer, Michael J, 1990. "Adverse Selection, Aggregate Uncertainty, and the Role for Mutual Insurance Contracts," The Journal of Business, University of Chicago Press, vol. 63(4), pages 493-510, October.
  9. Ray Rees & Hugh Gravelle & Achim Wambach, 1999. "Regulation of Insurance Markets," The Geneva Risk and Insurance Review, Palgrave Macmillan, vol. 24(1), pages 55-68, June.
  10. Doherty, Neil A & Dionne, Georges, 1993. " Insurance with Undiversifiable Risk: Contract Structure and Organizational Form of Insurance Firms," Journal of Risk and Uncertainty, Springer, vol. 6(2), pages 187-203, April.
  11. Lena Nekby, 2004. "Pure Versus Mutual Health Insurance: Evidence From Swedish Historical Data," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 71(1), pages 115-134.
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