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The Supply of Insurance

  • Peter ZweifelEmail author
  • Roland Eisen
Chapter
  • 4.6k Downloads
Part of the Springer Texts in Business and Economics book series (STBE)

Abstract

In this chapter the several dimensions of supply of insurance coverage are expounded. A first dimension is the pricing of insurance products. The objective is to calculate a minimum premium at which a single insurance product breaks even (noting that the market may not accept it). Section 6.1 introduces the reader to traditional premium calculation, where pricing depends upon the characteristics of the loss distribution and an exogenously given ruin probability (the probability of solvency, respectively), applying elements of probability theory. On the other hand, for the determination of the market price of an insurance product, the alternatives which are available to investors and insurance buyers (IB) on the capital market must be evaluated. Accordingly, in Sect. 6.2 elements of capital market theory are applied to derive the premium the insurance company (IC) must obtain to be sufficiently attractive to investors and can charge while still attracting IB, respectively.

Keywords

Equity Capital Capital Asset Price Model Stochastic Frontier Analysis Monetary Unit Loss Distribution 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Copyright information

© Springer-Verlag Berlin Heidelberg 2012

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of ZurichZurichSwitzerland
  2. 2.MunichGermany

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