nep-ias New Economics Papers
on Insurance Economics
Issue of 2010‒11‒27
three papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Challenges to Solvency II Reform in Insurance Industry By Ramosaj, Berim
  2. Natural Catastrophe Insurance: When Should the Government Intervene? By Arthur Charpentier; Benoît Le Maux
  3. Achieving equity in health through community based health insurance: India's experience with a large CBHI programme By Aradhna Aggarwal

  1. By: Ramosaj, Berim
    Abstract: Insurance Industry is going through a very important stage of its transformation - the transition from the classical system of management into a risk-based management. These changes were launched in Europe by international organizations which deal with the development of the necessary infrastructure for a better-managed industry and with a proper legal infrastructure through different European directives in insurance area. These changes have intensity in the finalization of the general technical, legal and structural infrastructure, which would be developed based on three pillars. The consequences of the current financial crisis as well as its impact towards the implementation of Insolvency II have not been analyzed yet. Its implementation, perhaps, would be an adequate response in facing this crisis.
    Keywords: Solvency II; insurance industry; insurance reform; risk-based management
    JEL: G11 G23 G30 G20 G22 G38 G18 G32 G28 G10
    Date: 2010–11–16
  2. By: Arthur Charpentier (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes I - Université de Caen); Benoît Le Maux (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes I - Université de Caen)
    Abstract: The present research relaxes three of the usual assumptions made in the insurance literature. It is assumed that (1) there is a finite number of risks, (2) the risks are not statistically independent and (3) the structure of the market is monopolistic. In this context, the article analyses two models of natural catastrophe insurance: a model of insurance with limited liability and a model with unlimited guarantee. Among others, the results confirm the idea that the natural catastrophe insurance industry is characterized by economies of scale. The government should consequently encourage the emergence of a monopoly and discipline the industry through regulated premiums. It is also shown that government intervention of last resort is not needed when the risks are highly correlated. Lastly, the results point out that when the risks between two regions are not sufficiently independent, the pooling of the risks can lead to a Pareto improvement only if the regions face similar magnitude of damage. If not, then the region with low-damage events needs the premium to decrease to accept the pooling of the risks.
    Keywords: Insurance, Ruin, Natural Catastrophe, Market Failure, Government Intervention
    Date: 2010–11–09
  3. By: Aradhna Aggarwal (Research Institute for Economics and Business Administration, Kobe University)
    Abstract: This paper analyses equity in one of the largest community based health insurance programme in India: Yeshasvini, run by the Department of Cooperation in Karnataka, a state in India. The analysis is based on a primary survey of 4109 households in rural Karnataka. The study covers various dimensions of vulnerability and assesses their relationship with enrolment, renewal of enrolment, and utilisation of health care services using logistic regression techniques. The results demonstrate that inequities do exist. However, they are less pronounced in the distribution of benefits than in enrolment and renewals. The study argues that while CBHI may be used as a mechanism to reach the most disadvantaged population groups, they can not be considered as substitute for government created health infrastructure.
    Keywords: Community-based health insurance (CBHI) Karnataka state India, Equity, Gender, vulnerability
    JEL: I18
    Date: 2010–11

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