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Catherine BOBTCHEFF (Toulouse School of Economics) – "Insurance pools for undiversifiable risks" joint work with David Alary and Carole Haritchabalet
Time: 12:15 pm – 1:30 pm
Date: 11th of October 2017
Place: Room 3001.
Catherine BOBTCHEFF (Toulouse School of Economics) – “Insurance pools for undiversifiable risks” joint work with David Alary and Carole Haritchabalet
Abstract: This paper discusses the decision of the European Commission not to renew the antitrust exemption for the setting up of syndicates in the insurance industry. Pools are constituted to provide insurance for undiversifiable and/or new risks for which insurers with private expertise are capacity constrained. Our objective is to study if such syndicates improve insurance supply. Organizing this supply amounts to sharing a common value divisible good between capacity constrained and privately informed agents with a reserve price. Pools turn out to operate as a uniform price auction with an “exit/re-entry” option that we compare to a discriminatory auction where no specific agreements are needed. Both auction formats lead to different coverage/premium tradeoffs. If at least one insurer is optimistic about the risk, the pool offers both lower premiums and higher coverage. This result is reversed when all insurers are pessimistic about the risk. Static comparative results with respect to capacity constraints and reserve price are provided.
Marie-Laure Allain (CREST – École polytechnique), Pierre Boyer (CREST – École polytechnique) & Laurent Linnemer (CREST – ENSAE ParisTech)
Link (before 08th of October 2017)