|
|
Tax Costs of Equity Capital and Social Welfare Implications for Catastrophe Insurance Reserves
|
When
|
17.00, Thursday 29th November 2007
|
|
Where
|
Leverhulme Library, room B617, Columbia House, LSE
|
|
Presentations
|
|
|
Speaker
|
Andreas Milidonis
|
|
From
|
University of Manchester
|
|
Abstract
|
We examine the use of catastrophe loss reserves in a stylized one-period model of insurance where insurers use equity capital and premiums to set up tax-deductible reserves for future catastrophes. The tax cost of equity capital, which accounts for a large part of insurance premiums, could essentially be removed through catastrophe reserves. Taking account of the potential changes in consumer behaviour due to the institution of catastrophe reserves, we discover that large social welfare gains are possible under certain circumstances. The benefits, however, depend on the actuarial assumptions underlying the expected loss distribution.
|
|
For further information
|
Tom Hewlett (Postgraduate Administrator) Ext. 6879
Department of Statistics, Columbia House
|
|
|