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Article: Pareto-efficient risk sharing in centralized insurance markets with application to flood risk
Title | Pareto-efficient risk sharing in centralized insurance markets with application to flood risk |
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Authors | |
Issue Date | 1-Jun-2024 |
Publisher | Wiley |
Citation | Journal of Risk and Insurance, 2024, v. 91, n. 2, p. 449-488 How to Cite? |
Abstract | Centralized insurance can be found in both the private and public sectors. This paper provides a microeconomic study of the risk-sharing mechanisms in these markets, where multiple policyholders interact with a centralized monopolistic insurer. With minimal assumptions on the risk preferences of the market participants, we characterize Pareto optimality in terms of the agents' risk positions and their assessment of the likelihoods associated with their loss tail events. We relate Pareto efficiency in this market to a naturally associated cooperative game. Based on our theoretical results, we then consider a model of flood insurance coverage via an illustrative example. The lessons drawn from our theoretical results and this example lead to important policy implications for the existing National Flood Insurance Program in the United States. |
Persistent Identifier | http://hdl.handle.net/10722/344747 |
ISSN | 2023 Impact Factor: 2.1 2023 SCImago Journal Rankings: 1.203 |
DC Field | Value | Language |
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dc.contributor.author | Boonen, Tim J | - |
dc.contributor.author | Chong, Wing Fung | - |
dc.contributor.author | Ghossoub, Mario | - |
dc.date.accessioned | 2024-08-06T08:46:37Z | - |
dc.date.available | 2024-08-06T08:46:37Z | - |
dc.date.issued | 2024-06-01 | - |
dc.identifier.citation | Journal of Risk and Insurance, 2024, v. 91, n. 2, p. 449-488 | - |
dc.identifier.issn | 0022-4367 | - |
dc.identifier.uri | http://hdl.handle.net/10722/344747 | - |
dc.description.abstract | <p>Centralized insurance can be found in both the private and public sectors. This paper provides a microeconomic study of the risk-sharing mechanisms in these markets, where multiple policyholders interact with a centralized monopolistic insurer. With minimal assumptions on the risk preferences of the market participants, we characterize Pareto optimality in terms of the agents' risk positions and their assessment of the likelihoods associated with their loss tail events. We relate Pareto efficiency in this market to a naturally associated cooperative game. Based on our theoretical results, we then consider a model of flood insurance coverage via an illustrative example. The lessons drawn from our theoretical results and this example lead to important policy implications for the existing National Flood Insurance Program in the United States.<br></p> | - |
dc.language | eng | - |
dc.publisher | Wiley | - |
dc.relation.ispartof | Journal of Risk and Insurance | - |
dc.rights | This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. | - |
dc.title | Pareto-efficient risk sharing in centralized insurance markets with application to flood risk | - |
dc.type | Article | - |
dc.description.nature | published_or_final_version | - |
dc.identifier.doi | 10.1111/jori.12468 | - |
dc.identifier.scopus | eid_2-s2.0-85191752716 | - |
dc.identifier.volume | 91 | - |
dc.identifier.issue | 2 | - |
dc.identifier.spage | 449 | - |
dc.identifier.epage | 488 | - |
dc.identifier.eissn | 1539-6975 | - |
dc.identifier.issnl | 0022-4367 | - |