Risk pooling and solvency regulation: A policyholder's perspective

The Role of Regulation in Banking: Liquidity Risk Perspective

The liquidity crisis in 2008 sparked interest in the role of regulation that could promote resilience and stability in the banking system. While the Public Interest theory suggests that legal policies could discipline banking activities, the Private Interest theory predicts otherwise, which impairs banking performance. The conflicting theories warrant comprehensive research, especially for Isla...

Restricted Coherent Risk Measures and Actuarial Solvency

Solvency capital, risk measures and comonotonicity: a review

In this paper we examine and summarize properties of several well-known risk measures that can be used in the framework of setting solvency capital requirements for a risky business. Special attention is given to the class of (concave) distortion risk measures. We investigate the relationship between these risk measures and theories of choice under risk. Furthermore we consider the problem of h...

Optimal Investment and Premium Policies under Risk Shifting and Solvency Regulation

Risk shifting is a well-known agency problem in corporate finance which also exists between policyholders and shareholders of insurance companies. Shareholders engage in excessive risk taking at the expense of policyholders who, in turn, are less willing to pay for insurance coverage. Solvency regulation addresses this incentive problem by restricting the set of investment strategies and premiu...

Risk Pooling, Risk Preferences, and Social Networks

Using data from a field experiment conducted in seventy Colombian municipalities, we investigate who pools risk with whom when risk pooling arrangements are not formally enforced. We explore the roles played by risk attitudes and network connections both theoretically and empirically. We find that pairs of participants who share a bond of friendship or kinship are more likely to (1) join the sa...