The Organizational Structure of Insurance Companies: The Role of Heterogeneous Risks and Guaranty Funds

11 Pages Posted: 18 Nov 2007

See all articles by James A. Ligon

James A. Ligon

University of Alabama

Paul D. Thistle

University of Nevada, Las Vegas - Department of Finance

Abstract

We examine a market with observably heterogeneous risks and a government sponsored guaranty fund and consider whether it is optimal to form a single insurer or separate insurers for each consumer type. Given the economic environment, pooling never dominates the formation of separate insurance companies. This result provides an incentive for the phenomenon of insurance fleets.

Suggested Citation

Ligon, James A. and Thistle, Paul D., The Organizational Structure of Insurance Companies: The Role of Heterogeneous Risks and Guaranty Funds. Journal of Risk & Insurance, Vol. 74, No. 4, pp. 851-862, December 2007. Available at SSRN: https://ssrn.com/abstract=1030868 or http://dx.doi.org/10.1111/j.1539-6975.2007.00237.x

James A. Ligon (Contact Author)

University of Alabama ( email )

P.O. Box 870244
Tuscaloosa, AL 35487
United States
205-348-6313 (Phone)
205-348-0590 (Fax)

Paul D. Thistle

University of Nevada, Las Vegas - Department of Finance ( email )

4505 S. Maryland Parkway
Las Vegas, NV 89154
United States
702-895-3856 (Phone)
702-895-4650 (Fax)

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