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Egalitarian Equivalent Capital Allocation

17 Pages Posted: 11 Apr 2015  

Shinichi Kamiya

Nanyang Technological University (NTU) - Nanyang Business School

George H. Zanjani

Georgia State University - Risk Management & Insurance Department

Date Written: April 9, 2015

Abstract

We apply Moulin’s notion of egalitarian equivalent cost sharing of a public good to the problem of insurance capitalization and capital allocation where the liability portfolio is fixed. We show that this approach yields overall capitalization and cost allocations that are Pareto efficient, individually rational, and, unlike other mechanisms, stable in the sense of adhering to cost monotonicity.

Keywords: Insurance, capital allocation, public good

JEL Classification: G11, G22, H41

Suggested Citation

Kamiya, Shinichi and Zanjani, George H., Egalitarian Equivalent Capital Allocation (April 9, 2015). Available at SSRN: https://ssrn.com/abstract=2592475 or http://dx.doi.org/10.2139/ssrn.2592475

Shinichi Kamiya (Contact Author)

Nanyang Technological University (NTU) - Nanyang Business School ( email )

Singapore, 639798
Singapore

George H. Zanjani

Georgia State University - Risk Management & Insurance Department ( email )

P.O. Box 4036
Atlanta, GA 30302-4036
United States
404-413-7464 (Phone)
404-413-7499 (Fax)

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