Optimization of Price, Default Ratio and Capital under Regulatory Criterion of Maximizing Social Benefit

Mao Hong () and Wen Zhongkai ()
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Mao Hong: Shanghai Second Polytechnic University, Shanghai, China
Wen Zhongkai: The University of Illinois at Chicago, Chicago, United States of America

Asia-Pacific Journal of Risk and Insurance, 2018, vol. 12, issue 2, 15

Abstract: In this paper, we explore the optimal price, default ratio, and capital for insurance companies under social welfare maximization from regulators' perspective. From comparisons of cases under symmetric and asymmetric information in the insurance market, we find that an optimal regulatory objective should be set to maximize social benefit and induce fair benefit distribution in a transparent insurance market, and direct regulation on capital constraint can increase insurance demand and shareholders' benefits in a non-transparent market.

Keywords: insurance pricing; default ratio; social benefit; consumers' surplus; weights (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1515/apjri-2017-0008

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