Insurance Premiums and Default Risk in Mutual Insurance

Charles S. Tapiero, Yehuda Kahane, Laurent Jacque

Research output: Contribution to journalArticlepeer-review


Two types of default risk are discussed in the article: The traditional “probability of ruin” (insurer being unable to meet his obligations) and a “perceived probability of ruin” (the probability of the insured being affected by ruin). The explicit relationship between these probabilities on the actuarial loading factors of a mutual insurer were developed. The explicit mathematical formulae obtained for these complex relationships were followed also by numerical results. A second concept presented in the paper is related to the idea of actuarially fair premiums. It is shown that the premium must also be a function of the payments of the other insured as well as their claim distributions, reflecting thereby the simultaneity and mutual dependence of the insured.

Original languageEnglish (US)
Pages (from-to)82-97
Number of pages16
JournalScandinavian Actuarial Journal
Issue number2
StatePublished - Apr 1 1986

ASJC Scopus subject areas

  • Statistics and Probability
  • Economics and Econometrics
  • Statistics, Probability and Uncertainty


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