Equilibrium in insurance markets with adverse selection when insurers pay policy dividends

Pierre Picard (1)

1 Département économie

We show that an equilibrium always exists in the Rothschild-Stiglitz insurance market model with adverse selection and an arbitrary number of risk types, when insurance contracts include policy dividend rules. The Miyazaki-WilsonSpence state-contingent allocation is an equilibrium allocation, and it is the only one when out-of-equilibrium beliefs satisfy a robustness criterion. It is shown that stock insurers and mutuals may coexist, with stock insurers o⁄ering insurance coverage at actuarial price and mutuals cross-subsidizing risks.

Mots clés: Insurance; Adverse Selection; Mutual; Participating Contract; Policy Dividend.

Domaines: Economies et finances

Pierre Picard. Equilibrium in insurance markets with adverse selection when insurers pay policy dividends. 2015. ⟨hal-01206073v1⟩