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Kotsch, H. The Risk Consolidation of the Insurance Industry from a Financial Perspective. Journal of Contextual Economics – Schmollers Jahrbuch, 116(3), 359-378.
Kotsch, Harald "The Risk Consolidation of the Insurance Industry from a Financial Perspective" Journal of Contextual Economics – Schmollers Jahrbuch 116.3, 1996, 359-378.
Kotsch, Harald (1996): The Risk Consolidation of the Insurance Industry from a Financial Perspective, in: Journal of Contextual Economics – Schmollers Jahrbuch, vol. 116, iss. 3, 359-378, [online]


The Risk Consolidation of the Insurance Industry from a Financial Perspective

Kotsch, Harald

Journal of Contextual Economics – Schmollers Jahrbuch, Vol. 116 (1996), Iss. 3 : pp. 359–378

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Kotsch, Harald


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This paper investigates the risk consolidation of insurance companies (stock corporations) on the basis of the Capital Asset Pricing Model. In the case of uncorrelated risks insurers enjoy economies of scale as the risk markup contained in the premium can be reduced by increasing the number of policies. However, this is not true of correlated risks. The results show furthermore that rational behaviour on the part of insurers involves their carrying out marginal-cost calculations, whereas the so-called “Insurance CAPM” has been implicitly based on average-cost calculations. The equilibrium on the insurance market under the conditions of perfect competition is analyzed from a welfare-economic viewpoint.