Insurance Pools for New Undiversifiable Risk

David Alary, Catherine Bobtcheff and Carole Haritchabalet ()
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David Alary: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique
Carole Haritchabalet: CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour

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Abstract: The European insurance industry benefits from some special antitrust exemptions. Indeed, insurers can syndicate, via a "pool", for the coverage of undiversifiable risks. We show that the pool issue amounts to share a common value divisible good between capacity constrained agents with a reserve price and private information. We characterize the equilibrium risk premium of this game and the resulting insurance capacity offered. We then compare the pool to a discriminatory auction upon two dimensions, the total capacity insured and the premiums. There is no clear domination of one auction format. Strength of affiliation and competition are key variables.

Keywords: competition; undiversifiable risk; common value auction; insurance (search for similar items in EconPapers)
Date: 2017-08-21
Note: View the original document on HAL open archive server: https://univ-pau.hal.science/hal-02439667v1
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Published in EEA-ESEM, European Economic Association, Aug 2017, Lisbon, Portugal

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Related works:
Working Paper: Insurance Pools for New Undiversifiable Risk (2017)
Working Paper: Insurance Pools for New Undiversifiable Risks ? (2013)
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