Combining Insurance, Contingent Debt, and Self-Retention in an Optimal Corporate Risk Financing Strategy
The authors provide a conceptual
framework for designing a comprehensive risk financing
strategy for a firm, using an optimal combination of three
instruments: self-retention, contingent debt, and insurance.
Using an original conceptual model, the risk management
decisions of the firm are first decomposed into two
sets-choosing attachment points for each layer of financing
used in the overall risk financing structure, and, then
determining optimal risk allocation arrangements within each
layer of risk. This model allows the authors to show how
these optimal risk financing arrangements are driven by the
costs of risk management instruments, the risk
characteristics, and the firm's borrowing constraints.
Finally, the authors provide an original perspective to
think about optimal ex ante risk management strategies,
based on a combination of insurance, savings, and credit at
the microeconomic or macroeconomic levels.
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Bibliographic Details
| Main Authors: |
Gurenko, Eugene,
Mahul, Olivier |
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| Format: | Policy Research Working Paper
biblioteca
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| Language: | English
en_US |
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| Published: |
World Bank, Washington, DC
2003-11
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| Subjects: | ADMINISTRATIVE COSTS,
AGENTS,
ATTACHMENT POINT,
BALANCE SHEET,
BORROWING,
BORROWING CONSTRAINTS,
BUSINESS CYCLES,
CAPITAL MARKETS,
CATASTROPHIC RISKS,
COINSURANCE,
CONCEPTUAL FRAMEWORK,
CONTRACTUAL SAVINGS,
COVERAGE,
DEBT,
DEBT CAPACITY,
DECISION MAKING,
DEFAULT RISK,
ECONOMIC BEHAVIOR,
ECONOMICS,
ECONOMISTS,
EQUITY CAPITAL,
FINANCIAL INTERMEDIARIES,
FINANCIAL MARKETS,
FINANCIAL SERVICES,
INCOME,
INDEMNITY,
INFORMATION ASYMMETRIES,
INSURANCE,
INSURANCE COVERAGE,
INSURANCE INDUSTRY,
INSURANCE PRODUCTS,
INSURANCE RATES,
INSURED LOSSES,
INSURERS,
MICROFINANCE,
MICROINSURANCE,
PROBABILITY OF DEFAULT,
PROFITABILITY,
PROGRAMS,
REINSURANCE,
RESERVES,
RETAINED EARNINGS,
RISK ALLOCATION,
RISK AVERSION,
RISK MANAGEMENT,
RISK MANAGERS,
RISK PREMIUM,
RISK SHARING,
RISK TRANSFER,
TRADEOFFS INSURANCE INDUSTRY,
FINANCING PLANS,
CONTINGENCY FINANCING,
DEBT FINANCING,
CORPORATE FINANCE,
SELF FINANCING,
RISK ASSESSMENT,
COST FUNCTIONS,
BORROWING COSTS,
SAVINGS BEHAVIOR,
ACCESS TO CREDIT,
MICROECONOMICS,
MACROECONOMIC CONTEXT,
TRADEOFFS, |
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| Online Access: | http://documents.worldbank.org/curated/en/2003/11/2813253/combining-insurance-contingent-debt-self-retention-optimal-corporate-risk-financing-strategy
http://hdl.handle.net/10986/17904
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