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On the Emergence of Private Insurance in Presence of Mutual Agreements

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  • Bourlès, Renaud

Abstract

The aim of this paper is to analyze the impact of the existence of mutual firms on the behavior of an insurance company and more precisely to study in which situations a private insurance firm may emerge in presence of an incumbent mutual firm. Our approach differs from the existing literature as we integrate the investment choices of the company and the fact that, because it commits on a fix contract, it can become insolvent. In such a situation we are able to characterize the unique optimal choices of an entrant company and the conditions favoring or preventing its appearance.

Suggested Citation

  • Bourlès, Renaud, 2007. "On the Emergence of Private Insurance in Presence of Mutual Agreements," MPRA Paper 5821, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:5821
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    References listed on IDEAS

    as
    1. 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.
    2. Garance Genicot & Debraj Ray, 2003. "Group Formation in Risk-Sharing Arrangements," Review of Economic Studies, Oxford University Press, vol. 70(1), pages 87-113.
    3. David Mayers & Clifford Smith, 2002. "Ownership Structure and Control: Property-Casualty Insurer Conversion to Stock Charter," Journal of Financial Services Research, Springer;Western Finance Association, vol. 21(1), pages 117-144, February.
    4. Hansmann, Henry, 1985. "The Organization of Insurance Companies: Mutual versus Stock," Journal of Law, Economics, and Organization, Oxford University Press, vol. 1(1), pages 125-153, Spring.
    5. 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.
    6. Ray Rees & Hugh Gravelle & Achim Wambach, 1999. "Regulation of Insurance Markets," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 24(1), pages 55-68, June.
    7. Raj Chetty, 2006. "A Bound on Risk Aversion Using Labor Supply Elasticities," NBER Working Papers 12067, National Bureau of Economic Research, Inc.
    8. 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.
    9. 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.
    10. 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).
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Insurance market; Mutual firms; Commitment; Insolvency;

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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