hedged with insurance. Recently, however, British Petroleum, one of the largest industrial companies in the world, decided upon a major change in its insurance strategy that turns the conventional wisdom on its head. In this article, we analyze why BP now insures against most smaller losses while self-insuring against the larger ones. Our analysis focuses on factors affecting the market supply of insurance as well as the corporate demand for it. On the demand side, we demonstrate that the primary…
Words 9852 - Pages 40