Default Risk, Demand for Insurance, andOptimal Corporate Risk Strategy of Insurance Companies

There is considerable empirical and experimental evidence that insurance demand issignificantly influenced by an insurance firm’s solvency level. For example, Sommer (1996)and Cummins and Danzon (1997) empirically show that a firm’s financial distress isaccompanied by a decrease in insurance premium income and vice versa. This relationship isfurther confirmed in a study by Epermanis and Harrington (2006) regarding the influence ofinsurer financial strength ratings on insurers’ premium growth. That insurance demand is verysensitive to the insurer’s default situation is further demonstrated by a few experimentalstudies on how consumers react to default risk. For example, Wakker et al. (1997), Albrechtand Maurer (2000), and Zimmer et al. (2009) show that people dislike insurance contractswith default risk...

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Year of publication:	2009-05-01
Authors:	Gründl, Helmut ; Zimmer, Anja ; Schade, Christian
Institutions:	Universität <Berlin, Humboldt-Universität> / Wirtschaftswissenschaftliche Fakultät
Subject:	Versicherungsbetrieb \| operating expenses for underwriting business \| Risikomanagement \| risk management \| Risikoprämie

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Extent:	447488 bytes 23 p. application/pdf
Series:	Universität Berlin, Humboldt-Universität - Wirtschaftswissenschaftliche Fakultät ; Publikationen Working Paper 2009
Type of publication:	Book / Working Paper
Language:	English
Classification:	Management of insurance ; Individual Working Papers, Preprints ; No country specification
Source:	USB Cologne (business full texts)