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

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

Blog Article

We study the optimal insurance design problem.This is a risk sharing problem between an insured and an insurer.The main novelty in this Wired paper is that we study this optimization problem under a risk-adjusted premium calculation principle for the insurance cover.

This risk-adjusted premium Fryer calculation principle uses the cost-of-capital approach as it is suggested (and used) by the regulator and the insurance industry.