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Insurance Premia Consistent with the Market

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  • Erio Castagnoli
  • Fabio Maccheroni
  • Massimo Marinacci

Abstract

We consider insurance prices in presence of an incomplete and competitive market. We show that if the insurance price system is internal, sublinear, and consistent with the market, then insurance prices are the maxima of their expected payments with respect to a family of risk neutral probabilities. We also show that under a simple additional assumption it is possible to decompose the obtained price in net premium plus safety loading.

Suggested Citation

  • Erio Castagnoli & Fabio Maccheroni & Massimo Marinacci, 2002. "Insurance Premia Consistent with the Market," ICER Working Papers - Applied Mathematics Series 24-2002, ICER - International Centre for Economic Research.
    • Handle: RePEc:icr:wpmath:24-2002
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    References listed on IDEAS

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