Insurance IPOs--A Test of the Underpricing Theories

Hamid Rahman and Kenneth Yung

Journal of Insurance Issues, 1999, vol. 22, issue 1, 61-77

Abstract: This paper uses a numerical experiment to observe the behavior of the variance of total losses of an insured group, as the group is continually divided and subdivided. In the tradition of Rothschild and Stiglitz (1976) only loss frequency is analyzed. The results of the experiment suggest that an insurer need only divide a large group of insureds into a relatively small number of subgroups (10–15) to achieve most of the efficiency gains that are available.

Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:wri:journl:v:22:y:1999:i:1:p:61-77

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