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on Insurance Economics |
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Issue of 2012‒11‒11
nine papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Tatsiramos, Konstantinos (University of Leicester); van Ours, Jan C. (Tilburg University) |
| Abstract: | With the emergence of the Great Recession unemployment insurance (UI) is once again at the heart of the policy debate. In this paper, we review the recent theoretical and empirical evidence on the labor market effects of UI design. We also discuss policy issues related to UI design, including the structure of benefits, the role of liquidity constraints and the pros and cons of a UI system in which the generosity of UI benefits is varying over the business cycle. Finally, we identify potential areas of future research. |
| Keywords: | labor market institutions, labor market policy, job search, unemployment dynamics, unemployment insurance |
| JEL: | J64 J65 J68 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6950&r=ias |
| By: | Tatsiramos, Konstantinos; van Ours, Jan C |
| Abstract: | With the emergence of the Great Recession unemployment insurance (UI) is once again at the heart of the policy debate. In this paper, we review the recent theoretical and empirical evidence on the labor market effects of UI design. We also discuss policy issues related to UI design, including the structure of benefits, the role of liquidity constraints and the pros and cons of a UI system in which the generosity of UI benefits is varying over the business cycle. Finally, we identify potential areas of future research. |
| Keywords: | Job search; Labor market institutions; Labor market policy; Unemployment dynamics; Unemployment insurance |
| JEL: | J64 J65 J68 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9196&r=ias |
| By: | Christophe Dutang (SAF - Laboratoire de Sciences Actuarielle et Financière - Université Claude Bernard - Lyon I : EA2429, IRMA - Institut de Recherche Mathématique Avancée - CNRS : UMR7501 - Université de Strasbourg); Hansjoerg Albrecher (UNIL - Université de Lausanne - Université de Lausanne); Stéphane Loisel (SAF - Laboratoire de Sciences Actuarielle et Financière - Université Claude Bernard - Lyon I : EA2429) |
| Abstract: | In this paper, we formulate a noncooperative game to model a non-life insurance market. The aim is to analyze the e ects of competition between insurers through di erent indicators: the market premium, the solvency level, the market share and the underwriting results. Resulting premium Nash equilibria are discussed and numerically illustrated. |
| Date: | 2012–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-00746245&r=ias |
| By: | Tatsiramos, K.; Ours, J.C. van (Tilburg University, Center for Economic Research) |
| Abstract: | Abstract: With the emergence of the Great Recession unemployment insurance (UI) is once again at the heart of the policy debate. In this paper, we review the recent theoretical and empirical evidence on the labor market effects of UI design. We also discuss policy issues related to UI design, including the structure of benefits, the role of liquidity constraints and the pros and cons of a UI system in which the generosity of UI benefits is varying over the business cycle. Finally, we identify potential areas of future research. |
| Keywords: | Unemployment insurance;unemployment dynamics;job search;labor market policy;labor market institutions. |
| JEL: | J64 J65 J68 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:2012082&r=ias |
| By: | De Donder, Philippe; Leroux, Marie-Louise |
| Abstract: | We build a political economy model where individuals differ in the extent of the behavioral bias they exhibit when voting first over social long-term care (LTC) insurance and then choosing the amount of LTC annuities. LTC annuities provide a larger return if dependent than if healthy. We study the majority voting equilibrium under three types of behavioral biases: myopia, optimism and sophisticated procrastination. Optimists and myopics similarly under-estimate their own dependency risk both when voting and when buying LTC annuities. They differ in that optimists know the correct average dependency risk (that determines the return of both social and private insurance), while myopics also under-estimate this average risk (and thus over-estimate the insurance return). Sophisticated procrastinators act as if they under-estimated their own risk when buying annuities, but anticipate this bias at the time of voting. We obtain that the stylized observation of lack of LTC insurance is compatible with agents being optimistic or myopic, but not sophisticated procrastinators. Increasing the dfference in return across dependency states for the LTC annuity is detrimental to sophisticated voters and to very biased myopic and optimist voters. Finally, less myopic individuals may end up worse off, at the majority-voting equilibrium, than more myopic agents, casting some doubt on the usefulness of information campaigns. |
| Keywords: | Majority Voting, Myopia, Optimism, Sophisticated Procrastinators, Dependency Linked Annuity, Enhanced Life Annuity, Complementary Private Insurance. |
| JEL: | D91 H55 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:ide:wpaper:26382&r=ias |
| By: | De Donder, Philippe; Leroux, Marie-Louise |
| Abstract: | We build a political economy model where individuals differ in the extent of the behavioral bias they exhibit when voting first over social long-term care (LTC) insurance and then choosing the amount of LTC annuities. LTC annuities provide a larger return if dependent than if healthy. We study the majority voting equilibrium under three types of behavioral biases: myopia, optimism and sophisticated procrastination. Optimists and myopics similarly under-estimate their own dependency risk both when voting and when buying LTC annuities. They differ in that optimists know the correct average dependency risk (that determines the return of both social and private insurance), while myopics also under-estimate this average risk (and thus over-estimate the insurance return). Sophisticated procrastinators act as if they under-estimated their own risk when buying annuities, but anticipate this bias at the time of voting. We obtain that the stylized observation of lack of LTC insurance is compatible with agents being optimistic or myopic, but not sophisticated procrastinators. Increasing the dfference in return across dependency states for the LTC annuity is detrimental to sophisticated voters and to very biased myopic and optimist voters. Finally, less myopic individuals may end up worse off, at the majority-voting equilibrium, than more myopic agents, casting some doubt on the usefulness of information campaigns. |
| Keywords: | Majority Voting, Myopia, Optimism, Sophisticated Procrastinators, Dependency Linked Annuity, Enhanced Life Annuity, Complementary Private Insurance. |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:26383&r=ias |
| By: | Beck, T.H.L.; De Jonghe, O.G.; Schepens, G. (Tilburg University, Center for Economic Research) |
| Abstract: | Abstract: This paper documents large cross-country variation in the relationship between bank competition and bank stability and explores market, regulatory and institutional features that can explain this variation. We show that an increase in competition will have a larger impact on banks’ fragility in countries with stricter activity restrictions, lower systemic fragility, better developed stock exchanges, more generous deposit insurance and more effective systems of credit information sharing. The effects are economically large and thus have important repercussions for the current regulatory reform debate. |
| Keywords: | Competition;Stability;Banking;Herding;Deposit Insurance;Information Sharing;Risk Shifting. |
| JEL: | G21 G28 L51 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:2012085&r=ias |
| By: | Stéphane Loisel (SAF - Laboratoire de Sciences Actuarielle et Financière - Université Claude Bernard - Lyon I : EA2429); Hans-U. Gerber (UNIL - Université de Lausanne - Université de Lausanne) |
| Abstract: | We present applications of risk theory to contemporary problems related to the implemented of Solvency II related concepts, like the Own Risk and Solvency Assessment. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-00746231&r=ias |
| By: | Ronkainen , Vesa (Financial Supervisory Authority) |
| Abstract: | This work studies and develops tools to quantify and manage the risks and uncertainty relating to the pricing of annuities in the long run. To this end, an idealized Monte-Carlo simulation model is formulated, estimated and implemented, which enables one to investigate some typical pension and life insurance products. The main risks in pension insurance relate to investment performance and mortality/longevity development. We first develop stochastic models for equity and bond returns. The S&P 500 yearly total return is modeled by an uncorrelated and Normally distributed process to which exogenous Gamma distributed negative shocks arrive with Geometrically distributed interarrival times. This regime switching jump model takes into account the empirical observations of infrequent exceptionally large losses. The 5-year US government bond yearly total return is modeled as an ARMA(1,1) process after suitably log-transforming the returns. This model is able to generate long term interest rate cycles and allows rapid year-to-year corrections in the returns. We also address the parameter uncertainty in these models. <p> We then develop a stochastic model for mortality. The chosen mortality forecasting model is the well-known model of Lee and Carter (1992), in which we use the Bayesian MCMC methods in the inference concerning the time index. Our analysis with a local version of the model showed that the assumptions of the Lee-Carter model are not fully compatible with Finnish mortality data. In particular we found that mortality has been lower than average for the cohort born in wartime. However, because the forecasts of these two models were not significantly different, we chose the more parsimonious Lee-Carter model. Although our main focus is on the total population data, we also analysed the data for males and females separately. Finally we build a flexible model for the dependence structure that allows us to generate stochastic scenarios in which mortality and economic processes are either uncorrelated, correlated or shock-correlated. <p> By using the simulation model to generate stochastic pension cash-flows, we are then able to analyse the financing of longevity risk in pension insurance and the resulting risk management issues. This is accomplished via three case studies. Two of these concentrate on the pricing and solvency questions of a pension portfolio. The first study covers a single cohort of different sizes, and the second allows for multiple cohorts of annuitants. The final case study discusses individual pension insurance from the customer and long-term points of view. <p> Realistic statistical long-term risk measurement is the key theme of this work, and so we compare our simulation results with the Value-at-Risk or VaR approach. The results show that the limitations of basic VaR approach must be carefully accounted for in applications. The VaR approach is the most commonly used risk measurement methodology in insurance and finance applications. For instance, it underlies the solvency capital requirement in Solvency II, which we also discuss in this work. |
| Keywords: | equities; stocks; jump model; bond; longevity; Lee-Carter model; stochastic mortality; cohort mortality; dependence model; asymmetric dependence; parameter uncertainty; stochastic annuity; pension; cohort size; solvency; internal model |
| JEL: | G12 J11 |
| Date: | 2012–05–25 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofism:2012_044&r=ias |