The Impact of Introducing Insurance Guaranty Schemes on Pricing and Capital Structure

Details

Serval ID
serval:BIB_785995B42A0A
Type
Article: article from journal or magazin.
Collection
Publications
Title
The Impact of Introducing Insurance Guaranty Schemes on Pricing and Capital Structure
Journal
Journal of Risk and Insurance
Author(s)
Schmeiser H., Wagner J.
ISSN
0022-4367
Publication state
Published
Issued date
2013
Peer-reviewed
Oui
Volume
80
Number
2
Pages
273-308
Language
english
Abstract
The introduction of an insurance guaranty scheme can have significant influence on the pricing and capital structures in a competitive market. The aim of this article is to study this effect on competitive equity-premium combinations while considering a framework with policyholders and equity holders where guaranty fund charges are volume-based, as levied in existing schemes. Several settings with regard to the origin of the fund contributions are assessed and the immediate effects on the incentives of the policyholders and equity holders are analyzed through a one-period contingent claim approach. One result is that introducing a guaranty scheme in a market with competitive conditions entails a shift of equity capital towards minimum solvency requirements. Hence, adverse incentives may arise with regard to the overall security level of the industry.
Web of science
Create date
04/07/2014 16:27
Last modification date
20/08/2019 15:35
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