Chapter 1, Problem 15.2EC

Is disaster insurance unfair to insurance companies ? Explain your answer and provide an example.

Would immediate public disclosure of such vulnerabilities be a good best practice?

A Japanese insurer is concerned with the positive correlation in losses resulting from earthquakes, while a U.S. insurer is concerned with the positively correlated losses from Hurricanes. Both insurers can buy reinsurance to ________ A Japanese insurer is concerned with the positive correlation in losses resulting from earthquakes, while a U.S. insurer is concerned with the positively correlated losses from Hurricanes. Both insurers can buy reinsurance to ________ Increase the independence of the exposures in their risk pools Diversify their investment portfolio Learn from each other’s experience Share with each other underwriting profits