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The Organizational Structure of Insurance Companies: The Role of Heterogeneous Risks and Guaranty Funds

James A. Ligon and Paul D. Thistle
The Journal of Risk and Insurance
Vol. 74, No. 4 (Dec., 2007), pp. 851-861
Stable URL: http://www.jstor.org/stable/25145250
Page Count: 11
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
The Organizational Structure of Insurance Companies: The Role of Heterogeneous Risks and Guaranty Funds
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Abstract

We examine a market with observably heterogeneous risks and a government sponsored guaranty fund and consider whether it is optimal to form a single insurer or separate insurers for each consumer type. Given the economic environment, pooling never dominates the formation of separate insurance companies. This result provides an incentive for the phenomenon of insurance fleets.

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