We study the optimal insurance design problem. This is a risk sharing problem between an insured and an insurer. The … for the insurance cover. This risk-adjusted premium calculation principle uses the cost-of-capital approach as it is … suggested (and used) by the regulator and the insurance industry. …

A simple formula for non-discriminatory insurance pricing is introduced. This formula is based on the assumption that … certain individual (discriminatory) policyholder information is not allowed to be used for insurance pricing. The suggested …

We develop a theory that connects insurance premiums, insurance companies’ investment behavior, and equilibrium asset … prices. Consistent with the model's key predictions, we show empirically that (1) insurers with more stable insurance funding … take more investment risk and, therefore, earn higher average investment returns; (2) insurance premiums are lower when …