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Insurance Pools for New Undiversifiable Risks ?

Author

Listed:
  • David Alary
  • Catherine Bobtcheff
  • Carole Haritchabalet

    (CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour)

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.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • David Alary & Catherine Bobtcheff & Carole Haritchabalet, 2013. "Insurance Pools for New Undiversifiable Risks ?," Post-Print hal-01879855, HAL.
    • Handle: RePEc:hal:journl:hal-01879855
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    References listed on IDEAS

    as
    1. Doherty, Neil A & Dionne, Georges, 1993. "Insurance with Undiversifiable Risk: Contract Structure and Organizational Form of Insurance Firms," Journal of Risk and Uncertainty, Springer, vol. 6(2), pages 187-203, April.
    2. Berger, Lawrence A & Cummins, J David & Tennyson, Sharon, 1992. "Reinsurance and the Liability Insurance Crisis," Journal of Risk and Uncertainty, Springer, vol. 5(3), pages 253-272, July.
    3. Michael Faure and & Roger Van den Bergh, 1995. "Restrictions of competition on insurance markets and the applicability of EC antitrust law," Kyklos, Wiley Blackwell, vol. 48(1), pages 65-85, February.
    4. Robert Wilson, 1979. "Auctions of Shares," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 93(4), pages 675-689.
    5. Olivier Mahul, 2003. "Efficient risk sharing within a catastrophe insurance pool," Post-Print hal-01952094, HAL.
    6. Back, Kerry & Zender, Jaime F, 1993. "Auctions of Divisible Goods: On the Rationale for the Treasury Experiment," The Review of Financial Studies, Society for Financial Studies, vol. 6(4), pages 733-764.
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