Using a principal-agent framework, we extend the insurance monopoly model (Stiglitz, 1977)

to self-insurance opportunities. Relying on a two-part tariff contract as an analytical tool, we

show that an insurance monopoly can achieve the same equilibrium as a competitive insurer.

However, in the monopoly situation, the insurer captures all the insurance market surplus.

Yet, compared to a monopoly market with insurance only, self-insurance opportunities act as

a threat to the insurer, resulting in a cut of the insurer's market power and an increase in the

policyholders' welfare. Moreover, within our principal-agent framework, we show that while

insurance and self-insurance are substitutes, compulsory self-insurance, and compulsory

insurance have non-equivalent effects. Although compulsory self-insurance reduces the

market size of the insurer, it has no impact on the policyholder's well-being. On the other

hand, mandatory insurance favors the insurer and makes policyholders worse off. The

implications of these public policies are discussed.

Keywords: self-insurance, insurance, monopoly, compulsory insurance, public regulation.

Classification JEL: D86, D42, G22