Multi-risk insurance demand testing.

Summary The objective of this research is to analyze the properties of optimal insurance demand in the presence of multiple insurable risks. The idea is that the insurance decision concerning a particular risk asset is not separable from the insurance decisions concerning the other risk assets held by the insured. We first investigate the effect of a better diversification of the risky component of wealth on the demand for insurance. We then show that the effect of risk diversification on the demand for insurance is conditioned by the existence of a positive or negative correlation between risk assets and by the greater or lesser homogeneity of these assets. Finally, we analyze the effect of a compulsory insurance constraint or a non-insurance constraint on the demand for freely chosen insurance.