kaal:claim:3396542-027

Because each underwriter sizes capital against the risk of that underwriter's overall portfolio, and underwriting can be diversifying for a non traditional participant, the sum of the underwriters' incremental Values at Risk may be less than the Value at Risk of a single insurance firm writing the same contracts.

As a result, the sum of the incremental VaRs (Value at Risk amounts) of the individual underwriters may be less than the VaR of an insurance firm that has underwritten the same contracts.

Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Decentralized Underwriting (2019), VI. Conclusion, p. 25
https://ssrn.com/abstract=3396542 · source PDF

Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Decentralized Underwriting (2019). SSRN: https://ssrn.com/abstract=3396542

• underwriter capital set by overall portfolio risk
• especially for non traditional underwriters

mechanismsupport: arguedrisk-and-incentivessystemic-risk

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