Demand of Insurance under the Cost-of-Capital Premium Calculation Principle

Michael Merz and Mario V. Wüthrich
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Michael Merz: Department of Business Administration, University of Hamburg, 20146 Hamburg, Germany
Mario V. Wüthrich: RiskLab, Department of Mathematics, ETH Zurich, 8092 Zurich, Switzerland

Risks, 2014, vol. 2, issue 2, 1-23

Abstract: We study the optimal insurance design problem. This is a risk sharing problem between an insured and an insurer. The main novelty in this paper is that we study this optimization problem under a risk-adjusted premium calculation principle for the insurance cover. This risk-adjusted premium calculation principle uses the cost-of-capital approach as it is suggested (and used) by the regulator and the insurance industry.

Keywords: demand of insurance; optimal insurance design; risk-adjusted premium; cost-of-capital loading; deductible and risk sharing (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jrisks:v:2:y:2014:i:2:p:226-248:d:37193

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