Dynamic Investment-Driven Insurance Pricing and Optimal Regulation
Fuente:
arXiv
Saved in:
| Main Authors: | , , |
|---|---|
| Format: | Preprint |
| Published: |
2024
|
| Subjects: | |
| Online Access: | |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| _version_ | 1866909573115281408 |
|---|---|
| author | Chen, Bingzheng Liang, Zongxia Pang, Shunzhi |
| author_facet | Chen, Bingzheng Liang, Zongxia Pang, Shunzhi |
| contents | This paper analyzes the equilibrium of insurance market in a dynamic setting, focusing on the interaction between insurers' underwriting and investment strategies. Three possible equilibrium outcomes are identified: a positive insurance market, a zero insurance market, and market failure. Our findings reveal why insurers may rationally accept underwriting losses by setting a negative safety loading while relying on investment profits, particularly when there is a negative correlation between insurance gains and financial returns. Additionally, we explore the impact of regulatory frictions, showing that while imposing a cost on investment can enhance social welfare under certain conditions, it may not always be necessary. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2410_18432 |
| institution | arXiv |
| publishDate | 2024 |
| record_format | arxiv |
| spellingShingle | Dynamic Investment-Driven Insurance Pricing and Optimal Regulation Chen, Bingzheng Liang, Zongxia Pang, Shunzhi Theoretical Economics Portfolio Management This paper analyzes the equilibrium of insurance market in a dynamic setting, focusing on the interaction between insurers' underwriting and investment strategies. Three possible equilibrium outcomes are identified: a positive insurance market, a zero insurance market, and market failure. Our findings reveal why insurers may rationally accept underwriting losses by setting a negative safety loading while relying on investment profits, particularly when there is a negative correlation between insurance gains and financial returns. Additionally, we explore the impact of regulatory frictions, showing that while imposing a cost on investment can enhance social welfare under certain conditions, it may not always be necessary. |
| title | Dynamic Investment-Driven Insurance Pricing and Optimal Regulation |
| topic | Theoretical Economics Portfolio Management |
| url | https://arxiv.org/abs/2410.18432 |