Journal of Risk and Uncertainty

, Volume 25, Issue 1, pp 47–64 | Cite as

Compensation for What? An Analysis of Insurance Strategies for Repairable Assets

  • Pierre-François Koehl
  • Bertrand Villeneuve
Article
  • 62 Downloads

Abstract

We define a repairable asset as an irreplaceable commodity whose quality is at risk, but can be partly restored at a cost. Examples are houses, automobiles and, especially, health, for which standard monetary approaches are oversimplified. To optimize the value of insurance, the insurer and the insured have to agree upon repair strategies (when to fix the asset and how much) and compensation rules (how much money to receive for other goods). We clarify the role of the consumer's preferences in the properties of the contract, and we highlight the relationship between repair strategies and the super- or submodular structure of the repair technology.

optimal insurance deductible clause repairable asset illiquidity multi-dimensional risk state dependent utility 

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Copyright information

© Kluwer Academic Publishers 2002

Authors and Affiliations

  • Pierre-François Koehl
    • 1
  • Bertrand Villeneuve
    • 2
  1. 1.CDC IXISParisFrance
  2. 2.CEA and IDEIUniversité de Toulouse 1ToulouseFrance

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