This paper examines the Bowley solution in the context of #insurance contracts using the expected utility framework. Specifically, the paper analyzes a sequential game between a #policyholder and an #insurer, in which the policyholder selects the optimal #indemnity function and the insurer adjusts the pricing kernel to maximize expected #netprofit. The paper finds that the optimal safety loading factor increases with the policyholder’s #riskaversion level and the #probability of zero loss. However, the paper also shows that the Bowley solution is #pareto dominated, meaning that both parties’ interests can be further improved.

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