The Role of Insurance in Corporate Risk Finance.
By Review of Business
- Release Date: 2003-09-22
- Genre: Business & Personal Finance
The Role of Insurance in Corporate Risk Finance. Review of Business Book Review Score: ★★★★★ 5/5 stars
This paper examines how the use of insurance as a risk transfer-financing technique affects a corporation's cost of capital and value. It explores this issue in relation to the conflict of interest between owners of a firm and their agents, transaction costs related to bankruptcy, government regulation and taxation, and insurers' real service efficiency. Finally, it recapitulates a view that even firms owned by well-diversified investment portfolios would prefer insurance to other available financing tools if the benefit firm the transfer is equal to, or greater than, the loading that the insurer adds to the actuarially fair premium. Introduction
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