Risk Considerations in Insurance Rate Making

Nahum Biger, Yehuda Kahane

Research output: Contribution to journalArticlepeer-review


This paper examines insurance pricing and its regulation in the con-
text of efficient capital markets. Starting with an aggregated model and
generalizing results reported recently in the literature about "proper"
underwriting profit, the paper turns to disaggregation of the model
with m insurance lines. The main result is that no unique set of rates
exists that regulators may impose to avoid disturbing market equilib-
rium. Preliminary empirical evidence presented shows that the "sys-
tematic risk" of underwriting profits approaches zero in most lines. Thus
an intuitive solution for underwriting profit rates in these lines equal to
minus the riskless interest rate, is reasonable
Original languageEnglish
Pages (from-to)121 132
JournalJournal of Risk and Insurance
Issue number1
StatePublished - 1978


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