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on Insurance Economics |
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Issue of 2006‒06‒24
six papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Bussiness Management |
| By: | DE DONDER, Philippe; HINDRIKS, Jean |
| JEL: | D82 G22 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:ide:wpaper:5516&r=ias |
| By: | Thomann, Christian; Graf von der Schulenburg, J.-Matthias |
| Abstract: | In our article we consider insurance as a means of allocating terrorism risk. Terrorism poses a significant challenge for insurers worldwide. In terms of possible losses it fits into the same category as earthquakes and hurricanes. Yet as a result of the uncertainty surrounding these risks private markets face significant difficulties in providing insurance for it. In the insurance industry costly risk bearing can explain the supply of capacity risks. Corporate risk management theory provides reasons why transaction costs can motivate firms to purchase insurance. In the context of these tightly connected theories we derive models for both the supply of terrorism reinsurance and the demand for terrorism insurance. Using two datasets from the German terrorism insurer we estimate models on how corporations in Germany employ government sponsored insurance to manage their terrorism risk and on the factors that determine the supply for private market terrorism reinsurance. |
| Keywords: | Terrorism Insurance, Risk Allocation, Regulation |
| JEL: | G22 G32 D61 |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:han:dpaper:dp-340&r=ias |
| By: | Estelle James (Urban Institute); Augusto Iglesias Palau (PrimAmerica) |
| Abstract: | Chile offers an innovative approach to disability insurance within a multi-pillar social security system. The individual’s retirement savings account is used as part of his disability insurance, but if he becomes disabled the account is topped up enough to finance a defined benefit annuity that pays 70% of the reference wage. This is accomplished primarily through the private insurance market, but with government providing regulations and back-up guarantees. The private pension funds and insurance companies that participate in the assessment process have a pecuniary interest in keeping costs low, unlike most public systems that are run by agencies without a personal incentive to contain costs. The individual accounts, used for old age retirement savings, help to finance the disability and survivors’ insurance as a joint product. This further keeps costs down and makes the system less sensitive to demographic shocks than a public pay-as-you-go system would be. However, pre-funding a defined benefit makes system costs much more sensitive to interest rate shifts. The defined benefit reduces risk to the worker but non-differentiated pricing creates cross-subsidies and, in a competitive market, incentives for creaming. Some of the cost reductions to the private insurance may imply a larger future public obligation, due to the minimum pension guarantee. This study examines the potential successes and pitfalls of this mixed public-private funded system of disability insurance and evaluates whether it provides a useful model for the US and other countries. |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:mrr:papers:wp111&r=ias |
| By: | Todd Elder (University of Illinois at Urbana-Champaign); Elizabeth Powers (University of Illinois at Urbana-Champaign) |
| Abstract: | Previous researchers have noted that the ‘categorical’ Medicaid eligibility accompanying the welfare programs Aid to Families with Dependent Children (AFDC) and Supplemental Security Income (SSI) often far exceeds the value of these programs’ cash benefits. It may be the case that the accompanying health insurance, not the cash benefit, is often the decisive factor in welfare participation. If so, welfare participation should decrease when cash and health insurance benefits are unbundled. We present a simple model of program participation with heterogeneous valuation of health insurance and transaction costs of participation. We evaluate the following four implications of the model: 1) SSI participation declines with the expansion of alternative routes to Medicaid (i.e., noncategorical Medicaid); 2) the availability of noncategorical Medicaid increases Medicaid participation among SSI nonparticipating eligibles; 3) the average SSI benefit collected by welfare recipients is higher when noncategorical Medicaid is available; and 4) the average SSI benefit rejected by nonparticipating SSI eligibles is higher when noncategorical Medicaid is available. Overall, the findings on the model’s testable implications are mixed. The estimates imply strikingly large effects of the presence of alternative routes to Medicaid on both SSI and Medicaid participation, but the results for the hypotheses about SSI benefit amounts are sensitive to controls for recipient characteristics. |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:mrr:papers:wp117&r=ias |
| By: | Narjess Boubakri; Georges Dionne; Thouraya Triki |
| Abstract: | We examine the long run performance of M&A transactions in the property-liability insurance industry. We specifically investigate whether such transactions create value for the bidders' shareholders and assess how corporate governance mechanisms affect such performance. Our results show that M&A create value in the long run as buy and hold abnormal returns are positive and significant after three years. While tender offers appear to be more profitable than mergers, our evidence does not support the conjecture that domestic transactions create more value than cross border transactions. Furthermore, positive returns are significantly higher for frequent acquirers and in countries where investor protection is better. Internal corporate governance mechanisms are also significant determinants of the performance of bidders. |
| Keywords: | Merger and acquisition, property-liability insurance, governance, value creation, performance of bidders |
| JEL: | D80 G22 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:lacicr:0626&r=ias |
| By: | Frédéric Chandelle (frederic.chandelle@assuralia.be); Jacqueline Haverals (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels.) |
| Abstract: | Au détour de conférences et selon les dires de la plupart des directeurs financiers de groupes d’assurances confrontés aux normes IFRS, leur implémentation est ou a été la relève d’un véritable défi. Outre le challenge lié à la compréhension et à l’application de ces normes, l’adoption du référentiel international a généré de nombreux coûts et a engendré divers changements organisationnels. Malgré l’intérêt de l’étude, les impacts des normes IFRS n’ont, jusqu’à ce jour, jamais été analysés par la recherche académique. Cette contribution a pour but de déterminer et d’analyser les impacts de l’introduction des normes comptables internationales dans un secteur complexe et plutôt méconnu, celui des assurances. Précisons qu’outre le passage aux normes IFRS, les assureurs de l’Union européenne font face à un autre projet clé. L’exercice “Solvabilité II” poursuit l’objectif de réviser l’ensemble des règles en matière de contrôle de la solvabilité de ces entreprises. Ce projet, qui constitue un des points majeurs du “Plan d’Actions pour les Services Financiers” de la Commission européenne, apparaît plus ambitieux, car plus global, que l’Accord “Bâle II” applicable au secteur bancaire. Son approche plus globale pourrait même, si la Commission obtient des résultats à la hauteur des ambitions qu’elle affiche, alimenter utilement les futures discussions en vue d’un prochain accord “Bâle III”. Cet article s’articule autour des quatre sections suivantes : Après une première section introductive, la deuxième section définit les enjeux de l’introduction des normes IFRS dans le secteur des assurances. Nous y verrons si les assureurs, ainsi que leurs autorités de tutelle, seront obligés de revivre les tracas et mécontentements du secteur bancaire , consacrant les divergences de vues irréconciliables entre, d’une part, le normalisateur comptable qu’est l’IASB et, d’autre part, les assureurs et leurs autorités de contrôle. La troisième section cerne les impacts financiers, organisationnels et marketing des normes IFRS sur le secteur belge de l’assurance, au travers de l’analyse des résultats d’une enquête conduite auprès d’une quinzaine d’entreprises avec la collaboration d’Assuralia (auparavant Union professionnelle des entreprises d’assurances). La quatrième section tire les principales conclusions de l’étude. |
| Keywords: | IFRS, Insurance Sector. |
| JEL: | G22 K34 |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:sol:wpaper:06-010&r=ias |