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Acts of God and ManRuminations on Risk and Insurance$
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Michael Powers

Print publication date: 2014

Print ISBN-13: 9780231153676

Published to Columbia Scholarship Online: November 2015

DOI: 10.7312/columbia/9780231153676.001.0001

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God-Awful Guessing and Bad Behavior

God-Awful Guessing and Bad Behavior

Solvency and Underwriting

Chapter:
(p.127) 8 God-Awful Guessing and Bad Behavior
Source:
Acts of God and Man
Author(s):

Michael R. Powers

Publisher:
Columbia University Press
DOI:10.7312/columbia/9780231153676.003.0008

Insurance companies throughout the world are generally subject to some form of government regulation, and such oversight can have a powerful effect on a company's internal risk management. This chapter provides a brief overview of government regulation of insurance company solvency. It then discusses the most pernicious risks encountered by insurance firms as they build their portfolios of exposures. It sets out both the positive and negative effects when the number of policyholders of an insurance company increases. Positive effects include enhanced stability of the company's financial results through diversification, reduced actuarial pricing error, and reduced classification error. Negative effects include increased classification error; increased information deficiencies; and decline in impact of initial net worth.

Keywords:   insurance companies, insurance industry regulation, government regulation, risk management, solvency, exposure

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