The Organizational Structure of Insurance Companies: The Role of Heterogeneous Risks and Guaranty Funds |
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| Authors: | James A Ligon ; Paul D Thistle† |
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| Institution: | James A. Ligon is associated with the Department of Economics, Finance &Legal Studies, University of Alabama. P.O. Box 870224, Tuscaloosa, AL 35487-0224;and Paul D. Thistle is at the University of Nevada-Las Vegas. |
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| 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. |
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