Rate Regulation and the Cost of Capital in the Insurance Industry

Robert A. Haugen and Charles O. Kroncke

Journal of Financial and Quantitative Analysis, 1971, vol. 6, issue 5, 1283-1305

Abstract: We have discussed some of the effects of rate regulation in the property and casualty insurance industry. One consequence of the regulatory environment is that an optimal capital structure may clearly exist in this industry. If the rate of return to the insureds is generally deficient, we would expect that property and casualty stock companies would have an incentive to lever themselves to the maximum extent permissible by selling insurance. The classic monopoly of the economic literature finances its lucrative investment opportunities in a competitive capital market. The stock insurance company invests in that market, but the relative distribution of the return earned there may be less than equitable due to the process and standards of rate regulation.

Date: 1971
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cup:jfinqa:v:6:y:1971:i:05:p:1283-1305_02

Access Statistics for this article

More articles in Journal of Financial and Quantitative Analysis from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().