Pricing and Deterrence

in Ensuring Corporate Misconduct

Published by University of Chicago Press

Published in print January 2011 | ISBN: 9780226035154
Published online March 2013 | e-ISBN: 9780226035079 | DOI:
Pricing and Deterrence

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This chapter, which explores whether the underwriting and pricing of Directors' and Officers' liability (D&O) insurance preserves the deterrence function of shareholder litigation, examines how insurers evaluate the riskiness of the insured in underwriting D&O insurance and how they price risk. It discusses the reasons offered by study participants to doubt that the differential pricing of D&O premiums deters corporate wrongdoing or provides adequate incentives to optimize corporate governance. The chapter concludes that while D&O insurers do seek to price on the basis of risk, their efforts are not enough to strengthen the deterrence function of shareholder litigation.

Keywords: D&O insurance; shareholder litigation; deterrence function; insurance pricing; risk; underwriting; corporate wrongdoing; corporate governance

Chapter.  11241 words.  Illustrated.

Subjects: Company and Commercial Law

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