Moral hazard: Difference between revisions
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imported>Doug Williamson (Expand. Source: The Treasurer, November 2015, p49.) |
imported>Doug Williamson (Link first definition expressly with the financial context.) |
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A tendency of managers take excessive risks knowing that their business will be saved by the authorities. | A tendency of managers of financial firms to take excessive risks knowing that their business will be saved by the authorities. | ||
Revision as of 21:35, 8 November 2015
1.
A tendency of managers of financial firms to take excessive risks knowing that their business will be saved by the authorities.
2.
The tendency of some insured individuals or businesses to take excessive risks that they would not have taken if they had not been insured.
3.
The risk that a party has not entered into a contract in good faith or provided misleading information.
For example an insured may attempt to take unfair advantage of an insurer or other guarantor by suppressing information relevant to the assessment of a risk or by not acting in accordance with the terms of a policy.
UK pensions legislation contains a number of clauses specifically designed to reduce the risk of moral hazard.
