Adriano Rampini () and
S Viswanathan ()
No 12855, CEPR Discussion Papers from C.E.P.R. Discussion Papers
Insurance has an intertemporal aspect as insurance premia have to be paid upfront. We argue that the financing aspect of insurance is key to understanding basic insurance patterns. In a model with limited enforcement, we show that insurance is globally monotone increasing in household net worth and income, incomplete, and precautionary. These results hold in economies with income risk, durable goods and collateral constraints, and durable goods price risk that affects asset values, under quite general conditions. In equilibrium, insurers are financial intermediaries with collateralized loans as assets and diversified portfolios of insurance claims as liabilities. Collateral scarcity lowers the interest rate, reduces insurance, and increases inequality.
Keywords: Collateral; Financial constraints; household finance; Insurance; Risk management (search for similar items in EconPapers)
JEL-codes: D91 E21 G22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ias, nep-mac and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at email@example.com
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:12855
Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... rs/dp.php?dpno=12855
Access Statistics for this paper
More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().