Equilibrium in a Reinsurance Market: Introducing Taxes

descriptionPublicationkeyboard_double_arrow_right Article 01 Dec 1994Publisher:Springer Science and Business Media LLCJournal:The Geneva Papers on Risk and Insurance Theory, volume 19, pages 101-117 (issn: 0926-4957, eissn: 1554-9658,

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Authors: Pierre-François Koehl; Jean-Charles Rochet;

doi: 10.1007/bf01371687

Equilibrium in a Reinsurance Market: Introducing Taxes

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Abstract

We introduce profit taxation in Borch's [1962] model of a competitive insurance market. We analyze the impact of taxation on equilibrium prices and characterize the cases where optimal risk sharing is preserved. In the case of Constant Relative Risk Aversion (CRRA) utility functions, this abstract characterization is translated into simple conditions involving the solvency ratios of the companies. The case of Constant Absolute Risk Aversion (CARA) utility functions is also studied.

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UNIVERSITE FEDERALE DE TOULOUSE MIDI-PYRENEES
France
University of Toulouse
France

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