A simple model of financial grey rhino under insurer capital regulation: an extension

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Title:	A simple model of financial grey rhino under insurer capital regulation: an extension
Authors:	Lin, Jyh-Horng;Chang, Chuen-Ping;Chen, Shi
Keywords:	financial grey rhino;absolute risk aversion;optimal guaranteed rate;insurer capital regulation
Date:	2020-11-15
Issue Date:	2020-12-08 12:10:19 (UTC+8)
Publisher:	Applied Economics
Abstract:	In a recent paper, Huang (2020) proposes a contingent claim model of financial grey rhino under capital regulation. A preliminary result is that stringent capital regulation enhances the insurer's survival, thereby contributing to insurance stability. In this note, we critically evaluate her objective setting and refine the comparative statics by developing a contingent claim utility model. We show that stringent capital regulation helps policyholder protections, but at the expense of the insurer's equity return, thus adversely affecting insurer survival.
Relation:	Applied Economics
Appears in Collections:	[Graduate Institute & Department of International Business] Journal Article

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