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Insurance Pools for New Undiversifiable Risk

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Abstract

The European insurance industry benefits from some special antitrust exemptions. Indeed, insurers can syndicate, via a "pool", for the coverage of undiversifiable risks. We show that the pool issue amounts to share a common value divisible good between capacity constrained agents with a reserve price and private information. We characterize the equilibrium risk premium of this game and the resulting insurance capacity offered. We then compare the pool to a discriminatory auction upon two dimensions, the total capacity insured and the premiums. There is no clear domination of one auction format. Strength of affiliation and competition are key variables.
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hal-02439718 , version 1 (14-01-2020)

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  • HAL Id : hal-02439718 , version 1

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David Alary, Catherine Bobtcheff, Carole Haritchabalet. Insurance Pools for New Undiversifiable Risk. 66th Annual of French Economic Association - AFSE, Jun 2017, Nice, France. ⟨hal-02439718⟩
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