nep-ias New Economics Papers
on Insurance Economics
Issue of 2009‒05‒09
five papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Risk selection in natural disaster insurance By Mario Jametti; Thomas von Ungern-Sternberg
  2. The Effect of Receiving Supplementary UI Benefits on Unemployment Duration By Kyyrä, Tomi; Parrotta, Pierpaolo; Rosholm, Michael
  3. Forecasting the Fragility of the Banking and Insurance Sector By Kerstin Bernoth; Andreas Pick
  4. AIDAN Policy Brief: Drug Prices and Affordability By All India Drug Action Forum AIDAN
  5. Choice Between Microfinance System Operating on the Basis of Individual Liability Loan Contract or Through Joint Liability Loan Contract By Kundu, Amit

  1. By: Mario Jametti (University of Lugano); Thomas von Ungern-Sternberg (Université de Lausanne)
    Abstract: It is widely recognized that market failure prevents efficient risk sharing in natural disaster insurance, leading to several public-private partnership arrangements across the globe. We argue that risk selection, a situation where the public partner insures the majority of high risk agents, is potentially an important issue. To illustrate our concerns we build a simple model of reinsurance in a natural disaster insurance market. We show that risk selection is a likely equilibrium outcome and discuss the policy options available. The model is based on the French institutional setup and describes well the stylized facts. The policies implemented by the French government correspond to the ones we identify to alleviate risk selection. We also present two alternative public-private partnership setting that deal effectively with risk selection; hurricane insurance in Florida and catastrophe insurance in Spain.
    Keywords: Risk selection, natural disaster, property insurance, reinsurance.
    JEL: G22 L11 Q54
    Date: 2009
  2. By: Kyyrä, Tomi (Government Institute for Economic Research); Parrotta, Pierpaolo (Department of Economics, Aarhus School of Business); Rosholm, Michael (Department of Economics, Aarhus School of Business)
    Abstract: We consider the consequences of working part-time on supplementary unemployment insurance benefits in the Danish labour market. Following the “timing-of-events” approach we estimate causal effects of subsidized part-time work on the hazard rate out of unemployment insurance benefit receipt. We find evidence of a negative lock-in effect and a positive post-treatment effect, both of which vary across individuals. The resulting net effect on the expected unemployment duration is positive for some groups (e.g. married women) and negative for others (e.g. young workers)
    Keywords: Unemployment benefits; Part-time work; Lock-in effect; Treatment effect; Duration analysis
    JEL: C41 J65
    Date: 2009–01–01
  3. By: Kerstin Bernoth; Andreas Pick
    Abstract: This paper considers the issue of forecasting financial fragility of banks and insurances using a panel data set of performance indicators, namely distance-to- default, taking unobserved common factors into account. We show that common factors are important in the performance of banks and insurances, analyze the influences of a number of observable factors on banking and insurance performance, and evaluate the forecasts from our model. We find that taking unobserved common factors into account reduces the the root mean square forecasts error of firm specific forecasts by up to 11% and of system forecasts by up to 29% relative to a model based only on observed variables. Estimates of the factor loadings suggest that the correlation of financial institutions has been relatively stable over the forecast period.
    Keywords: Financial stability, financial linkages, banking, insurances, unobserved common factors, forecasting
    JEL: C53 G21 G22
    Date: 2009
  4. By: All India Drug Action Forum AIDAN
    Abstract: India has a booming drug industry and has contributed to making generics at low prices worldwide. But medicines within India are overpriced and unaffordable. Price regulation of medicines is a key public policy measure for health of India’s teeming masses. Only the Government of India can do it --- like it has done for cell phone rates, insurance premia, electricity tariff, bank interest rates, etc.
    Keywords: drug prices, health care, medicare, medicines, drug prices, public policy, health studies
    Date: 2009
  5. By: Kundu, Amit
    Abstract: In this paper we consider that a representative of a not so affluent rural household has three options. He (she) may join in a microfinance system operating on the basis of individual liability credit contract, or on the basis of joint liability loan contract through forming self-help group or may not participate in any type of microfinance system. This paper establishes that wealthier among the not so affluent rural household prefers to join microfinance system operating on the basis of individual liability loan contract, comparatively less wealthy prefers to join microfinance system operating on the basis of joint liability loan contract and ultra poor is less likely to join any type of microfinance system. This paper establishes that a household with high dependency ratio and higher intra-household decision making power of the head of the women of that household also influences the household to join microfinance system and in both the situations the probability of joining microfinance system operating on the basis of joint liability loan contract is slightly higher. It is also established that microfinance system fails to solve the ageing problem in rural areas because aged persons are less prone to join in any type of microfinance system.
    Keywords: Microfinance; Individual liability; Joint Liability
    JEL: D10 A10 C21 G21
    Date: 2009–05–05

This nep-ias issue is ©2009 by Soumitra K Mallick. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.