Dynamic Investment-Driven Insurance Pricing and Optimal Regulation
This paper analyzes the equilibrium of insurance market in a dynamic setting, focusing on the interaction between insurers' underwriting and investment strategies. Three possible equilibrium outcomes are identified: a positive insurance market, a zero insurance market, and market failure. Our findings reveal why insurers may rationally accept underwriting losses by setting a negative safety loading while relying on investment profits, particularly when there is a negative correlation between insurance gains and financial returns. Additionally, we explore the impact of regulatory frictions, showing that while imposing a cost on investment can enhance social welfare under certain conditions, it may not always be necessary.
Code (0)
등록된 구현이 없습니다.
Similar Papers 제목 키워드 기반
Optimal Investment and Pricing in the Presence of Defaults
We consider the optimal investment problem when the traded asset may default, causing a jump in its price. For an investor with constant absolute risk aversion, we compute indifference prices for defaultable bonds, as we…
Portfolio and reinsurance optimization under unknown market price of risk
We investigate the optimal investment-reinsurance problem for insurance company with partial information on the market price of the risk. Through the use of filtering techniques we convert the original optimization probl…
Stochastic OptimizationOptimal investment and proportional reinsurance in a regime-switching market model under forward preferences
In this paper we study the optimal investment and reinsurance problem of an insurance company whose investment preferences are described via a forward dynamic exponential utility in a regime-switching market model. Finan…
SensitivityOptimal investment and reinsurance under exponential forward preferences
We study the optimal investment and proportional reinsurance problem of an insurance company, whose investment preferences are described via a forward dynamic utility of exponential type in a stochastic factor model allo…
Optimal Reinsurance and Investment in a Diffusion Model
We consider a diffusion approximation to an insurance risk model where an external driver models a stochastic environment. The insurer can buy reinsurance. Moreover, investment in a financial market is possible. The fina…