Insurance demand and welfare-maximizing risk capital—Some hints for the regulator in the case of exponential preferences and exponential claims

Daniel Burren

Insurance: Mathematics and Economics, 2013, vol. 53, issue 3, 551-568

Abstract: We propose two models to analyze welfare-maximizing capital requirements for insurance companies considering that capital is costly and therefore affecting the premium. Within a continuous-time model, we derive insurance demand and welfare as a function of personal wealth, the insurance company’s wealth, and the claims process, and compare them to their counterparts in a static model. Besides discussing welfare-maximizing capital, we provide some new insights on insurance demand.

Keywords: Welfare-maximizing risk capital; Insurance demand; Risk theory; Optimal stochastic control (search for similar items in EconPapers)
JEL-codes: C61 D60 D81 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:53:y:2013:i:3:p:551-568

DOI: 10.1016/j.insmatheco.2013.08.001

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