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Title:Mutual versus stock insurers: Fair premium, capital, and solvency PDF Logo
Authors:Laux, Christian
Muermann, Alexander
Issue Date:2006
Series/Report no.:CFS Working Paper 2006/26
Abstract:Mutual insurance companies and stock insurance companies are different forms of organized risk sharing: policyholders and owners are two distinct groups in a stock insurer, while they are one and the same in a mutual. This distinction is relevant to raising capital, selling policies, and sharing risk in the presence of financial distress. Up-front capital is necessary for a stock insurer to offer insurance at a fair premium, but not for a mutual. In the presence of an ownermanager conflict, holding capital is costly. Free-rider and commitment problems limit the degree of capitalization that a stock insurer can obtain. The mutual form, by tying sales of policies to the provision of capital, can overcome these problems at the potential cost of less diversified owners.
Subjects:Ownership Structure
Insurance
Qwner-Manager Conflict
Capital, Default
JEL:G22
G32
Persistent Identifier of the first edition:urn:nbn:de:hebis:30-38003
Document Type:Working Paper
Appears in Collections:CFS Working Paper Series, Universität Frankfurt a. M.

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