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Title:Be as safe as possible: A behavioral approach to the optimal corporate risk strategy of insurers PDF Logo
Authors:Zimmer, Anja
Gründl, Helmut
Schade, Christian
Issue Date:2012
Series/Report no.:ICIR Working Paper Series 06/11
Abstract:This paper empirically studies the impact of consumer reaction to default risk on an insurer's optimal solvency level. Using experimentally obtained data, we derive a price-default risk-demand-curve that serves as an input variable for the insurer's risk strategy. We show that an insurer should choose to be default-free rather than having even a very small default probability. This risk strategy is also optimal when assuming substantial transaction costs for risk management activities undertaken to achieve the maximum solvency level.
Subjects:Behavioral Insurance
Risk Management of Insurance Companies
Document Type:Working Paper
Appears in Collections:ICIR Working Paper Series, International Center for Insurance Regulation, Universität Frankfurt

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