English, Article edition: An insurance paradox Michael R. Powers

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Physical Description
  • article
Language
  • English

Edition details

Title
  • An insurance paradox
Author
  • Michael R. Powers
Physical Description
  • article
Notes
  • Purpose – To consider why the law of large numbers does not play a more significant role in determining an insurer's financial leverage. Design/​methodology/​approach – Insurer-group data show that there is little relationship between an insurer's premium volume and its overall leverage (i.e. net written premium-to-surplus ratio). An explanation is sought for the lack of a positive scale effect by considering concomitant negative scale effects. Findings – It is argued that insurers frequently convert the benefits of the law of large numbers into economic subsidies for expanded writings that include poorer risks. Originality/​value – The editorial identifies and explores a significant scale phenomenon in the insurance sector that is generally overlooked.
  • Gearing, Risk management, Underwriting
  • RePEc:eme:jrfpps:v:7:y:2006:i:2:p:113-116
Language
  • English
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