5. Insurance, the Archetypal Risk Management Institution, its Opportunities and Vulnerabilities

Financial Markets (2011) (ECON 252) In the beginning of the lecture, Professor Shiller talks about risk pooling as the fundamental concept of insurance, followed by references to moral hazard and selection bias as prominent problems of the insurance industry. In order to provide an explicit example from the insurance industry, he elaborates on the story behind American International Group (AIG), from its creation by Cornelius Vander Starr in Shanghai in 1919, to Maurice Hank Greenberg s time as CEO, unti