We examine equilibria in competitive insurance markets with adverse selection when wealth differences arise endogenously from unobservable savings or labor supply decisions. The endogeneity of wealth implies that high risk individuals may ceteris paribus exhibit the lower marginal willingness to...

We examine equilibria in competitive insurance markets when individuals take unobservable labor supply decisions. Precautionary labor motives introduce countervailing incentives in the insurance market, and equilibria with positive profits can occur even in the standard case in which individuals...

We study a competitive insurance market in which insurers have an imperfect informative advantage over policyholders. We show that the presence of insurers privately and heterogeneously informed about risk can explain the concentration levels, the persistent profitability and the pooling of risk...

Kenneth Arrow and Karl Borch published several important articles in the early 1960s that can be viewed as the beginning of modern economic analysis of insurance activity. This chapter reviews the main theoretical and empirical contributions in insurance economics since that time. The review...

How does catastrophe-risk awareness affect selection patterns in catastrophe insurance markets? Catastrophe insurance is often provided by government entities and frequently involves substantial cross-subsidization between people facing very different levels of risk, which could generate adverse...

We show that on-demand insurance contracts, an innovative form of coverage recently introduced through the InsurTech sector, can serve as a screening device. To this end, we develop a new adverse selection model consistent with Wilson (1977), Miyazaki (1977) and Spence (1978). Consumers have...

This paper provides a complete characterization of equilibria in a game-theoretic version of Rothschild and Stiglitz's (1976) model of competitive insurance. I allow for stochastic contract offers by insurance firms and show that a unique symmetric equilibrium always exists. Exact conditions...

The German insurance market was liberalized in 1994 by the introduction of the 'single passport' allowing European insurers to operate throughout the entire European Union. The European directive put also an end to price and insurance contract terms regulation. These measures were meant for...

Until its liberalisation in 1994 exclusive agents dominated the distribution of products in the German life insurance industry. Since then, their importance has been declining for the benefit of both distribution via direct distribution channel and independent agents. However, the market shares...

We document a novel transmission channel of monetary policy through the homeowners insurance market. On average, contractionary monetary policy shocks result in higher homeowners insurance prices. Using granular data on insurers' balance sheets, we show that this effect is driven by the...