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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
Published by: American Risk and Insurance Association
Stable URL: http://www.jstor.org/stable/25145250
Page Count: 11
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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.
The Journal of Risk and Insurance © 2007 American Risk and Insurance Association