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Type | Journal Article |
Scope | Discipline-based scholarship |
Title | The dynamics of insurance prices |
Organization Unit | |
Authors |
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Item Subtype | Original Work |
Refereed | Yes |
Status | Published in final form |
Language |
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Journal Title | The Geneva Risk and Insurance Review |
Publisher | Palgrave Macmillan Ltd. |
Geographical Reach | international |
ISSN | 1554-964X |
Volume | 41 |
Number | 1 |
Page Range | 2 - 18 |
Date | 2016 |
Abstract Text | We develop a continuous-time general-equilibrium model to rationalise the dynamics of insurance prices in a competitive insurance market with financial frictions. Insurance companies choose underwriting and financing policies to maximise shareholder value. The equilibrium price dynamics are explicit, which allows simple numerical simulations and generates testable implications. In particular, we find that the equilibrium price of insurance is (weakly) predictable and the insurance sector always realises positive expected profits. Moreover, rather than true cycles, insurance prices exhibit asymmetric reversals caused by the reflection of the aggregate capacity process at the dividend and recapitalisation boundaries. |
Related URLs | |
Digital Object Identifier | 10.1057/grir.2015.5 |
Other Identification Number | merlin-id:13294 |
PDF File | Download from ZORA |
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Additional Information | This is a post-peer-review, pre-copyedit version of an article published in The Geneva Risk and Insurance Review. The definitive publisher-authenticated version Henriet, D., Klimenko, N. & Rochet, JC. Geneva Risk Insur Rev (2016) 41: 2 is available online at: doi:10.1057/grir.2015.5 |