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- Title
Adverse Selection and the Opaqueness of Insurers.
- Authors
Zhang, Tao; Cox, Larry A.; Van Ness, Robert A.
- Abstract
While adverse selection problems between insureds and insurers are well known to insurance researchers, few explore adverse selection in the insurance industry from a capital markets perspective. This study examines adverse selection in the quoted prices of insurers' common stocks with a particular focus on the opacity of both asset portfolios and underwriting liabilities. We find that more opaque underwriting lines result in greater adverse selection costs for property-casualty (P-C) insurers. A similar effect is not apparent for life-health (L-H) insurers and we find no effect of asset opaqueness on adverse selection for either L-H or P-C insurers.
- Subjects
ADVERSE selection (Insurance); INSURANCE companies; INSURANCE policies; INSURANCE; CAPITAL market; PROPERTY insurance; CASUALTY insurance
- Publication
Journal of Risk & Insurance, 2009, Vol 76, Issue 2, p295
- ISSN
0022-4367
- Publication type
Article
- DOI
10.1111/j.1539-6975.2009.01300.x