nep-ias New Economics Papers
on Insurance Economics
Issue of 2009‒01‒17
seven papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. On the Systemic Nature of Weather Risk By Guenther Filler; Martin Odening; Ostap Okhrin; Wei Xu
  2. Optimal Risk Sharing Under Limited Commitment: Evidence From Rural Vietnam By Eozenou, Patrick
  3. Competition among Health Plans: A Two-Sided Market Approach By David Bardey; Jean-Charles Rochet
  5. Ageing and the payout phase of pensions, annuities and financial markets By Pablo Antolin
  6. O tratare complexa a sistemului de pensii din Romania By Stegaroiu, Valentin
  7. Sizing up performance measures in the financial services sector By Jacob A. Bikker

  1. By: Guenther Filler; Martin Odening; Ostap Okhrin; Wei Xu
    Abstract: Systemic weather risk is a major obstacle for the formation of private (non- subsidized) crop insurance. This paper explores the possibility of spatial diversification of insurance by estimating the joint occurrence of unfavorable weather conditions in different locations. For that purpose copula methods are employed that allow an adequate description of stochastic dependencies between multivariate random variables. The estimation procedure is applied to weather data in Germany. Our results indicate that indemnity payments based on temperature as well as on cumulative rainfall show strong stochastic dependence even at a national scale. Thus the possibility to reduce risk exposure by increasing the trading area of the insurance is limited. Irrespective of their economic implications our results pinpoint the necessity of a proper statistical modeling of the dependence structure of multivariate random variables. The usual approach of measuring stochastic dependence with linear correlation coefficients turned out to be questionable in the context of weather insurance as it may overestimate diversification effects considerably.
    Keywords: weather risk, crop insurance, copula
    JEL: C14 Q19
    Date: 2009–01
  2. By: Eozenou, Patrick
    Abstract: We use panel data from a household survey conducted in Vietnam to analyze the effectiveness of informal risk sharing arrangements in protecting household consumption from idiosyncratic income shocks. We focus on the effects of reported harvest shocks and of estimated shocks to agricultural revenues on adult equivalent consumption. The full-insurance allocation is tested against a specified alternative under which contracts are not fully enforceable ex-post. We find that farmers hit by unfavorable events stabilize their consumption level below the village aggregate level, irrespective of the level of realized shocks. At the same time, farmers experiencing more favorable shocks enjoy higher consumption in proportion to the realized value of idiosyncratic shocks. Together, these finding are consistent with a simple 2-period model of optimal risk sharing with one-sided limited commitment. These results hold for total consumption and for non-durable consumption. We also find however some evidence supporting the full insurance hypothesis for food consumption.
    Keywords: Consumption; Risk-sharing; Informal Insurance;Vietnam
    JEL: O1 I3 D8
    Date: 2008–09
  3. By: David Bardey; Jean-Charles Rochet
    Abstract: Classical analysis of health insurance markets often focuses on adverse selection, which creates a direct externality between the enrollees of the same health plan: under an imperfect risk adjustment, the higher the risks of my co-enrollees, the higher my cost of insurance. This has lead to the view that restricting the diversity of accessible physicians may be good for policyholders, in a context where competition between health plans can lead to a "death spiral" for the less restrictive plan. This paper defends the opposite view that diversity might pay, because of the indirect externality between policyholders and physicians. By attracting higher risks, the less restrictive plan may also guarantee a higher level of activity to its physicians, and therefore negotiate with them a lower fee-for-service rate. By explicitly modeling the two sides of the market for health (policyholders and physicians), we are able to …find examples in which competition between health plans gives a higher pro…fit to the less restrictive plan.
    Date: 2009–01–08
  4. By: Stegaroiu, Valentin
    Abstract: The EU expansion process is a dynamic one which requires the candidate country to acknowledge the latest developments in communitarian social policy. The dominant economic aspects are currently reinforced by the social ones. Likewise, a consensus must exist regarding the implementation in Romania of the communitarian legislation in this vast domain, but also of the process of re-establishing the differences towards the SM as far as the Romanian social security system is concerned in retrieving them.
    Keywords: social insurance ; pensions; public social insurance system; social insurance pension
    JEL: A13
    Date: 2008–11–25
  5. By: Pablo Antolin
    Abstract: This paper reviews the impact of ageing on private pensions, in particular on the payout phase, assesses the part that annuities can play in financing retirement, and examines the role of financial markets in facilitating the allocation on assets accumulated in defined contribution pension plans. A comprehensive set of recommendations for discussion is provided at the end of the paper.<P>Le vieillissement de la population et la phase de versement des pensions, rentes viagères et marchés financiers<BR>Ce document examine l’impact du vieillissement de la population sur les pensions privées, spécialement sur la phase de versement des pensions, évalue le rôle que les rentes viagères peuvent jouer pour financier la retraite, et examine le rôle de les marchés financiers pour faciliter l’allocation des actifs accumulés dans les plans de retraite à cotisations définies. Un ensemble de recommandations pour discussion est fourni à la fin du document.
    Keywords: plans de pension à cotisations définies, rente viagère, risque de longévité, Annuities, annuity markets, defined contribution plans , longevity risk, longevity-indexed bonds, marches des rentes viagères, annuity providers, deferred life annuities, insurance companies, lump-sums, programmed withdrawal, retirement income, compagnie d’assurances, retrait programmé, revenu des retraites, versement unique, long-term bonds, bons à long terme, indice de longévité, rentes viagères différées
    JEL: D11 D14 D91 E21 G11 G38 J14 J26
    Date: 2008–12
  6. By: Stegaroiu, Valentin
    Abstract: The pension system in Romania is currently in the process of identifying methods and models that meet the requirements imposed by the disappearance of barriers in the flow of goods, capital and service mobility. Taking this into consideration, solutions to a more complex study of the Romanian pension system must be found.
    Keywords: social insurance; pension system; contributions;social dimension
    JEL: A13
    Date: 2008–11–25
  7. By: Jacob A. Bikker
    Abstract: The adequate performance of banks, insurers and pension funds is of crucial importance to their private and business customers. The prices and quality of financial products sold by such entities are largely determined by operational efficiency and the degree of competition in the markets concerned. Since efficiency and competition cannot be observed directly, various indirect measures in the form of simple indicators or more complex models have been devised and used both in economic theory and in business practice. This paper demonstrates that measuring the performance of financial institutions is no simple matter and that indicators differ strongly in quality. It investigates which methods are to be preferred and how by combining certain indicators stronger measures may be developed. These measures are then subjected to a predictive validity test.
    Keywords: concentration, competition, costs, efficiency, performance, profits, banks, insurance firms, pension funds, predictive validity test
    JEL: C52 G21 G22 G23 G28 L1
    Date: 2008–12

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