1. (a) Discuss risk aversion from a utility perspective. [2] (b) Discuss why policyholder's risk aversion is crucial for the existence of insurance. [2] (c) Is a publicly listed insurance provider likely to be risk averse, risk neutral or risk loving? Provide at least one reason for your response. [2] (d) In the context of your answer in parts (b) and (c) above, discuss how can an insurance provider provide insurance when faced with potential losses that are larger than the premiums charged. [2] (e) If the insurance provider had perfect knowledge of the shape of the utility function of each policyholder in a portfolio, discuss the action of a profit-maximising insurance provider. Ignore market competition. [2]