Insurance firms in the United States generally operate on a multiline basis, meaning that they provide coverage for two or more insurance lines, such as auto and homeowner insurance. Most states, however, require that firms offering mortgage or title insurance operate on a monoline basis,...

This paper uses the tools of welfare economics to analyse the appropriate mix of private sector and government responses to catastrophic events. In particular, we examine the appropriate roles of post-disaster government aid, private insurance and mitigation activities. The analysis focuses on...

We study multiline insurance companies with limited liability. Insurance premiums are determined by no-arbitrage principles. The results are developed under the realistic assumption that the losses created by insurer default are allocated among policyholders following an "ex post", pro rata,...

The recent financial crisis has revealed significant externalities and systemic risks that arise from the interconnectedness of financial intermediaries' risk portfolios. We develop a model in which the negative externality arises because intermediaries' actions to diversify that are optimal for...

We introduce costly internal capital into a standard insurance model, in which a risk-averse policyholder buys insurance from a risk-neutral insurer with limited liability. The unique optimal contract and internal capital lead to a strictly positive probability for insurer default. Some risks...

.

This paper provides a formal model of contingent convertible bonds (CCBs), a new instrument offering potential value as a component of corporate capital structures for all types of firms, as well as being considered for the reform of prudential bank regulation following the recent financial...