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Risks 2014, 2(2), 226-248; doi:10.3390/risks2020226
Article

Demand of Insurance under the Cost-of-Capital Premium Calculation Principle

1
 and 2,3,*
Received: 11 March 2014; in revised form: 28 May 2014 / Accepted: 4 June 2014 / Published: 17 June 2014
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Abstract: We study the optimal insurance design problem. This is a risk sharing problem between an insured and an insurer. The main novelty in this paper is that we study this optimization problem under a risk-adjusted premium calculation principle for the insurance cover. This risk-adjusted premium calculation principle uses the cost-of-capital approach as it is suggested (and used) by the regulator and the insurance industry.
Keywords: demand of insurance; optimal insurance design; risk-adjusted premium; cost-of-capital loading; deductible and risk sharing demand of insurance; optimal insurance design; risk-adjusted premium; cost-of-capital loading; deductible and risk sharing
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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MDPI and ACS Style

Merz, M.; Wüthrich, M.V. Demand of Insurance under the Cost-of-Capital Premium Calculation Principle. Risks 2014, 2, 226-248.

AMA Style

Merz M, Wüthrich MV. Demand of Insurance under the Cost-of-Capital Premium Calculation Principle. Risks. 2014; 2(2):226-248.

Chicago/Turabian Style

Merz, Michael; Wüthrich, Mario V. 2014. "Demand of Insurance under the Cost-of-Capital Premium Calculation Principle." Risks 2, no. 2: 226-248.


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