Date of Award

9-3-2009

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Risk Management and Insurance

First Advisor

Ajay Subramanian - Chair

Second Advisor

Susan Laury

Third Advisor

George Zanjani

Fourth Advisor

Richard Phillips

Fifth Advisor

Martin Grace

Abstract

This dissertation includes two essays on adverse selection and moral hazard problems in reinsurance markets. The first essay builds a competitive principal-agent model that considers adverse selection and moral hazard jointly, and characterizes graphically various forms of separating Nash equilibria. In the second essay, we use panel data on U.S. property liability reinsurance for the period 1995-2000 to test for the existence of adverse selection and moral hazard. We find that (1) adverse selection is present in private passenger auto liability reinsurance market and homeowners reinsurance market, but not in product liability reinsurance market; (2) residual moral hazard does not exist in all the three largest lines of reinsurance, but is present in overall reinsurance markets; and (3) moral hazard is present in the product liability reinsurance market, but not in the other two lines of reinsurance.

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Insurance Commons

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