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Contribution Details

Type Journal Article
Scope Discipline-based scholarship
Title Value creation in the insurance industry
Organization Unit
Authors
  • John Hancock
  • Paul Huber
  • Pablo Koch Medina
Item Subtype Original Work
Refereed Yes
Status Published in final form
Language
  • English
Journal Title Risk management and insurance review
Publisher Wiley-Blackwell Publishing, Inc.
Geographical Reach international
ISSN 1098-1616
Volume 4
Number 2
Page Range 1 - 9
Date 2001
Abstract Text Using the insights of current research in corporate finance and financial institutions, the authors briefly present a consistent economic framework for looking at insurance. Shareholders of insurance companies provide risk capital that is invested in financial assets and therefore earns the market return of the assets it is invested in. However, due to the legal and fiscal environment insurance companies are in, they have a competitive disadvantage at investing, and this gives rise to frictional capital costs. The core competence of insurers is in managing the size of these frictional capital costs. Insurers must ensure that they can sell insurance for a price in excess of what they need to produce the cover they sell and compensate the incurred frictional costs on risk capital. It is through the ability to do so that insurers create shareholder value.
Free access at Official URL
Digital Object Identifier 10.1111/1098-1616.00001
Other Identification Number merlin-id:9569
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