Demand for insurance in a portfolio setting

Jack Meyer () and Michael B. Ormiston
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Michael B. Ormiston: Department of Economics, Arizona State University, 85287-3806 Tempe Arizona

The Geneva Risk and Insurance Review, 1995, vol. 20, issue 2, 203-211

Abstract: This paper takes an additional step toward analyzing the demand for insurance in the context of a portfolio model. An investor is endowed with a portfolio containing a risky and riskless asset that can be augmented by purchasing insurance. Here, insurance is paid for by reducing the quantity of the risky insurable asset, holding the quantity of the riskless asset fixed. In the standard insurance demand model, insurance is paid for by reducing the amount of the riskless asset. This distinction leads to a different insurance demand function because the opportunity cost of purchasing insurance is now random. The Geneva Papers on Risk and Insurance Theory (1995) 20, 203–211. doi:10.1007/BF01258397

Date: 1995
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