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on Insurance Economics |
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Issue of 2019‒12‒23
fourteen papers chosen by Soumitra K. Mallick Indian Institute of Social Welfare and Business Management |
| By: | Lucie Schmidt; Lara Shore-Sheppard; Tara Watson |
| Abstract: | The expansion of public insurance eligibility that occurred with the Affordable Care Act (ACA) Medicaid expansions may have spillover effects to other public assistance programs. We explore the impact of the ACA on two large safety net programs: the Earned Income Tax Credit (EITC) and the Supplemental Nutrition Assistance Program (SNAP). We use a county border-pair research design, examining county-level administrative measures of EITC and SNAP participation in contiguous county pairs that cross state lines where the county on one side of the border experienced the Medicaid expansion and the county on the other side did not. This approach allows us to focus narrowly on differences arising from the ACA Medicaid expansion choice, implicitly controlling for local economic trends that could affect safety net participation. Our results suggest that the Medicaid expansion increased participation in SNAP, and possibly in the EITC, in counties that expanded relative to nearby counties that did not expand. We corroborate and extend these results using individual level data from the American Community Survey (ACS). Our results show that access to one safety net program may increase take-up of others. |
| JEL: | I13 I38 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26504&r=all |
| By: | David Alary (LERNA - Laboratoire d'Economie des ressources Naturelles - INRA - Institut National de la Recherche Agronomique); Franck Bien (LEDa - Laboratoire d'Economie de Dauphine - CNRS - Centre National de la Recherche Scientifique - IRD - Institut de Recherche pour le Développement - Université Paris-Dauphine) |
| Abstract: | In this note, we consider an adverse selection problem involving an insurance market à la Rothschild-Stiglitz. We assume that part of the loss is uninsurable as in the case with health care or environmental risk. We characterize sufficient conditions such that adverse selection by itself does not distort competitive insurance contracts. A sufficiently large uninsurable loss provides an incentive to high-risk policy holders not to mimic low-risk policy holders without distorting the optimal coverage. |
| Keywords: | Adverse Selection,Background risk,Optimal Contract |
| Date: | 2019–12–02 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-02390017&r=all |
| By: | Barbe, Martin |
| Keywords: | Agricultural Finance, Crop Production/Industries, Risk and Uncertainty |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:ags:usao19:296834&r=all |
| By: | Hamish Low; Luigi Pistaferri |
| Abstract: | We show the extent of errors made in the award of disability insurance using matched survey-administrative data. False rejections (Type I errors) are widespread, and there are large gender differences in these type I error rates. Women with a severe, work-limiting, permanent impairment are 20 percentage points more likely to be rejected than men, controlling for the type of health condition, occupation, and a host of demographic characteristics. We investigate whether these gender differences in Type I errors are due to women being in better health than men, to women having lower pain thresholds, or to women applying more readily for disability insurance. None of these explanations are consistent with the data. We use evidence from disability vignettes to suggest that there are different acceptance thresholds for men and women. The differences by gender arise because women are more likely to be assessed as being able to find other work than observationally equivalent men. Despite this, after rejection, women with a self-reported work limitation do not return to work, compared to rejected women without a work limitation. |
| Keywords: | Disability Insurance, Gender Differences |
| JEL: | I38 J16 |
| Date: | 2019–12–06 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:889&r=all |
| By: | International Monetary Fund |
| Abstract: | The insurance sector in Malta is relatively large and sophisticated. The sector has grown significantly since Malta’s accession to the European Union (EU) in 2004, and its total assets amounted to €11.9 billion (105 percent of gross domestic product (GDP)) at end-2017. Its sophisticated structure is evidenced by the presence of four professional reinsurers, eight captive insurers, 14 protected cell companies (PCC), and one reinsurance special purpose vehicle (SPV). The life insurance and reinsurance industries are highly concentrated. |
| Keywords: | Financial crises;Financial regulation and supervision;Macroprudential policies and financial stability;Financial services;Economic conditions;ISCR,CR,MFSA,security sector,insurer,regulated entity,insurance group |
| Date: | 2019–11–21 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:19/348&r=all |
| By: | Hamish Low; Luigi Pistaferri |
| Abstract: | We show the extent of errors made in the award of disability insurance using matched survey-administrative data. False rejections (Type I errors) are widespread, and there are large gender differences in these type I error rates. Women with a severe, work-limiting, permanent impairment are 20 percentage points more likely to be rejected than men, controlling for the type of health condition, occupation, and a host of demographic characteristics. We investigate whether these gender differences in Type I errors are due to women being in better health than men, to women having lower pain thresholds, or to women applying more readily for disability insurance. None of these explanations are consistent with the data. We use evidence from disability vignettes to suggest that there are different acceptance thresholds for men and women. The differences by gender arise because women are more likely to be assessed as being able to fi nd other work than observationally equivalent men. Despite this, after rejection, women with a self-reported work limitation do not return to work, compared to rejected women without a work limitation. |
| JEL: | H55 J16 J71 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26513&r=all |
| By: | Thorstensen, Vera Helena; Ratton, Michelle; Coelho, Alexandre Ramos |
| Abstract: | This article aims to examine the regulatory framework of such international financial system, including global regulatory forums and institutions, as well as the types of regulations, mostly within the scope of soft law. Also seeks to demonstrate the influence of the international structure on the rules of Brazil's credit, capital, and insurance markets, finally pointing to the challenges of the global financial system. |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:fgv:eesptd:518&r=all |
| By: | Toni Ahnert; Martin Kuncl |
| Abstract: | Third parties often assume default risk at loan origination in return for a fee. Insurance, various guarantees and external credit enhancements protect the owner of the loan against borrower default. Governments often assume such default risk through guarantees for various types of loans, including mortgages, student loans and small business loans. The widespread use of loan default insurance raises important questions: What is the impact of loan insurance on secondary market liquidity and on lending standards in primary markets? And is there a role for government intervention? We propose a simple model of lending where borrowers are screened at loan origination and lenders can learn about loan quality over time. Lenders can transfer the loan default risk to outside financiers at loan origination through loan insurance. Alternatively, they can transfer the default risk after a liquidity shock or after learning about loan quality by selling the loan in the secondary market. The model features a trade-off between secondary market liquidity and lending standards. The timing of risk transfer affects this trade-off. Loan insurance lowers the lending standards but improves the liquidity in secondary markets with a net improvement in welfare. Since lenders do not take into account the positive benefit of insurance on the liquidity in the market for uninsured loans, there is insufficient loan insurance in equilibrium. This implies that a regulator can improve welfare by subsidizing loan default insurance. We also consider a policy of outright loan purchases and show that while it is optimal to have it as an option to rule out inferior equilibria, only a policy of insurance subsidy is optimally used in equilibrium. |
| Keywords: | Financial Institutions; Financial markets; Financial system regulation and policies |
| JEL: | G01 G21 G28 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:19-47&r=all |
| By: | Johannes G. Jaspersen; Marc A. Ragin; Justin R. Sydnor |
| Abstract: | Can measured risk attitudes and associated structural models predict insurance demand? In an experiment (n = 1,730), we elicit measures of utility curvature, probability weighting, loss aversion, and preference for certainty and use them to parameterize seventeen common structural models (e.g., expected utility, cumulative prospect theory). Subjects also make twelve insurance choices over different loss probabilities and prices. The insurance choices show coherence and some correlation with various risk-attitude measures. Yet all the structural models predict insurance poorly, often less accurately than random predictions. Simpler prediction heuristics show more promise for predicting insurance choices across different conditions. |
| JEL: | D01 D81 G22 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26508&r=all |
| By: | Anna Denkowska; Stanis{\l}aw Wanat |
| Abstract: | This work is an answer to the EIOPA 2017 report. It follows from the latter that in order to assess the potential systemic risk we should take into account the build-up of risk and in particular the risk that arises in time, as well as the interlinkages in the financial sector and the whole economy. Our main tools used to analyse the systemic risk dynamics in the European insurance sector during the years 2005-2019 are the topological indices of minimum spanning trees (MST) and the deltaCoVaR measure. We address the following questions: 1) What is the contribution to systemic risk of each of the 28 largest European insurance companies whose list includes also those appearing on the G-SIIs list? 2) Does the analysis of the deltaCoVaR of those 28 insurance companies and the conclusions we draw agree with the our claims from our latest article [Wanat S., Denkowska A. 2019]. In clear: does the most important contribution to systemic risk come from the companies that have the highest betweenness centrality or the highest degree in the MST obtained? |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1912.05641&r=all |
| By: | Laura Khoury (Norwegian School of Economics and Business Administration - Norwegian School of Economics and Business Administration); Clément Brébion (PSE - Paris School of Economics, CEET - Centre d'études de l'emploi et du travail - CNAM - Conservatoire National des Arts et Métiers [CNAM] - M.E.N.E.S.R. - Ministère de l'Education nationale, de l’Enseignement supérieur et de la Recherche - Ministère du Travail, de l'Emploi et de la Santé); Simon Briole (PSE - Paris School of Economics, J-PAL - Abdul Latif Jameel Poverty Action Lab - MIT - Massachusetts Institute of Technology) |
| Abstract: | Entitlement conditions are a little explored dimension of unemployment insurance (UI) schemes. In this paper, we provide a comprehensive evaluation of a reform that softened the minimum employment record condition to qualify for UI benefits in France after 2009. Using administrative panel data matching employment and unemployment spells, we first provide clear evidence that the reform induced a separation response at the eligibility threshold. It appears both at the micro level – through a jump in transitions from employment to unemployment – and at the macro level – through the scheduling of shorter contracts, in line with the new eli- gibility requirements. Exploiting the reform as well as relevant sample restrictions, we then estimate the effects of receiving UI benefits on subsequent labour market outcomes using a regression discontinuity design. Our findings point to a large negative impact of UI benefits receipt on employment probability up to 21 months after meeting the eligibility criterion, which is not counterbalanced by an increase in job quality. |
| Keywords: | Job quality,Unemployment,Employment duration,Behavioural response,Entitlement conditions |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-02393383&r=all |
| By: | Burrell, Hamish (Tasmanian School of Business & Economics, University of Tasmania); Vespignani, Joaquin (Tasmanian School of Business & Economics, University of Tasmania) |
| Abstract: | This study establishes the first empirical evidence of the impact of economic uncertainty shocks on industry-level investment, output and employment in Australia. We find the Construction and Financial and Insurance Services industries are the most impacted by a shock to economic uncertainty. Statistically significant declines are observed for investment, output and employment in the Construction industry, and in terms of magnitude, the declines in output and employment are the largest across all industries studied. Likewise, the Financial and Insurance Services industry experiences declines across investment, output and employment, and undergoes the largest decline in investment in comparison to all other industries examined. Economic uncertainty explains the most substantial portion of the variation in Financial and Insurance Services investment and output, highlighting the detrimental effect it has on the Financial and Insurance Services industry. Furthermore, Health Care and Social Assistance output and Professional, Scientific and Technical Services investment experience considerable declines, and in contrast, Public Administration and Safety is shown to be the least impacted industry. |
| Keywords: | economic uncertainty, economic uncertainty shocks, SVAR, Australian economy, Australian industries |
| JEL: | C10 C32 E00 E30 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:tas:wpaper:32142&r=all |
| By: | International Monetary Fund |
| Abstract: | This Note analyzes laws, policies, and procedures for bank failure mitigation and resolution, and for preparation and management of a financial crisis in Malta. It addresses the supervision of bank recovery plans, early intervention when problems are identified, resolution planning, resolution funding, and deposit insurance. Until recently, Malta had no bank failures since the 1970’s; two banks have failed in the past two years, and these experiences are assessed. |
| Keywords: | Financial crises;Central banks;Macroprudential policies and financial stability;Financial services;Financial institutions;ISCR,CR,MFSA,DCS,ELA,CBM,insolvency |
| Date: | 2019–11–21 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:19/346&r=all |
| By: | Alicia H. Munnell; Anqi Chen |
| Abstract: | The option to claim Social Security benefits at any age from 62 to 70 – with actuarial adjustments designed o keep lifetime benefits constant for an individual ith average life expectancy – is a key feature of the rogram. The actuarial adjustments, however, are decades old and do not reflect improvements in longevity or other important developments over that time. The option to claim early was introduced over 60 years ago, when Congress set 62 as the program’s Earliest Age of Eligibility. Those claiming at 62 receive 20 percent less in monthly benefits than if they had waited until 65 to claim. The option to claim between 65 and 70 on an actuarially fair basis stems from the 1983 Social Security amendments, which gradually increased the annual “delayed retirement credit” from 3 percent to 8 percent. Much has changed since these actuarial adjustments were introduced: interest rates have declined; life expectancy has increased; and longevity improvements have been much greater for higher earners than lower earners. In the wake of these developments, this brief explores whether the historical adjustments are still actuarially correct. The discussion proceeds as follows. The first section provides a brief history of the Social Security benefit adjustments. The second section explains how increasing life expectancy and declining interest rates would call for smaller reductions for early claiming and a smaller delayed retirement credit for later claiming. The third section explores the extent to which existing adjustments deviate from actuarially fair magnitudes, finding that the reduction for early claiming – initially about right – is now too large, while the delayed retirement credit – initially too small – is now about right. The fourth section moves from the average worker to explore the impact of the actuarial adjustments on workers at various earnings levels given the disparity in longevity improvements. The final section concludes that the adjustment factors now favor delayed claiming and, as a result, increasingly benefit higher earners. |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:crr:issbrf:ib2019-18&r=all |