coinsurance effect


The reduced tendency of two companies that have merged together both declaring bankruptcy compared to the likelihood of either company declaring bankruptcy if the merger did not take place. The combination of both the assets and liabilities of the two firms spreads the risks and rewards facing the individual companies over a wider area. The coinsurance effect, if held true, can reduce the yield on corporate debt due to the reduced chances of the combined companies going under.
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coinsurance clause coinsurance limit