BU353 Lecture Notes - Lecture 8: Mutual Insurance, Casualty Insurance, Double Taxation
Document Summary
Chapter 8: insurance companies: financial structure and legal environment. Insurance companies are institutions that economize on the contracting costs associated with pooling arrangements, including distribution, underwriting, and loss adjustment expenses. Economic capital the difference between the market value of assets and the market value of liabilities. The most common form of policyholder-owned insurer is called a mutual insurer. They are incorporated insurance companies that usually charge fixed, advance premiums to policyholders. Another type of insurer with policy ownership is called a reciprocal; these are not incorporated, but instead managed by an attorney in fact (a management company). Limited liability maximum loss limited to amount of money invested. Lloyd"s of london is not an insurance company but instead an organization that provides a set of rules and procedures under which insurance business is transacted. Specific assets when assets have greater value to one firm than to other firms. Franchise value value of a firm"s specific assets.