nep-ias New Economics Papers
on Insurance Economics
Issue of 2020‒06‒08
nine papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. The Value of Health Insurance during a Crisis: Effects of Medicaid Implementation on Pandemic Influenza Mortality By Clay, Karen; Lewis, Joshua; Severnini, Edson R.; Wang, Xiao
  2. Climate Risk Assessment of the Sovereign Bond Portfolio of European Insurers By Stefano Battiston; Petr Jakubik; Irene Monasterolo; Keywan Riahi; Bas van Ruijven
  3. Arbeitslosenversicherung für Solo-Selbständige: Eine qualitative Studie zur Antragspflichtversicherung nach § 28a SGB III By Sowa, Frank
  4. Skewed Idiosyncratic Income Risk over the Business Cycle: Sources and Insurance By Christopher Busch; David Domeij; Fatih Guvenen; Rocio Madera
  5. Regression by clustering using metropolis-hastings By Simón Ramírez Amaya; Adolfo J. Quiroz; Álvaro José Riascos Villegas
  6. Propagation of cyber incidents in an insurance portfolio: counting processes combined with compartmental epidemiological models By Caroline Hillairet; Olivier Lopez
  7. Unemployment insurance, Recalls and Experience Rating By Julien Albertini; Xavier Fairise; Anthony Terriau
  8. Saving Motives over the Life-Cycle By Pashchenko, Svetlana; Porapakkarm, Ponpoje
  9. Parisian excursion with capital injection for draw-down reflected Levy insurance risk process By Budhi Surya; Wenyuan Wang; Xianghua Zhao; Xiaowen Zhou

  1. By: Clay, Karen (Carnegie Mellon University); Lewis, Joshua (University of Montreal); Severnini, Edson R. (Carnegie Mellon University); Wang, Xiao (Carnegie Mellon University)
    Abstract: This paper studies how better access to public health insurance affects infant mortality during pandemics. Our analysis combines cross-state variation in mandated eligibility for Medicaid with two influenza pandemics — the 1957-58 "Asian Flu" pandemic and the 1968-69 "Hong Kong Flu" — that arrived shortly before and after the program's introduction. Exploiting heterogeneity in the underlying severity of these two shocks across counties, we find no relationship between Medicaid eligibility and pandemic infant mortality during the 1957-58 outbreak. After Medicaid implementation, we find that better access to insurance in high-eligibility states substantially reduced infant mortality during the 1968-69 pandemic. The reductions in pandemic infant mortality are too large to be attributable solely to new Medicaid recipients, suggesting that the expansion in health insurance coverage mitigated disease transmission among the broader population.
    Keywords: public health insurance, medicaid, influenza pandemics
    JEL: I13 I18 N32 N52
    Date: 2020–04
  2. By: Stefano Battiston; Petr Jakubik; Irene Monasterolo; Keywan Riahi; Bas van Ruijven (EIOPA)
    Abstract: In the first collaboration between climate economists, climate financial risk modellers and financial regulators, we apply the CLIMAFIN framework described in Battiston at al. (2019) to provide a forward-looking climate transition risk assessment of the sovereign bonds’ portfolios of solo insurance companies in Europe. We consider a scenario of a disorderly introduction of climate policies that cannot be fully anticipated and priced in by investors. First, we analyse the shock on the market share and profitability of carbon-intensive and low-carbon activities under climate transition risk scenarios. Second, we define the climate risk management strategy under uncertainty for a risk averse investor that aims to minimise her largest losses. Third, we price the climate policies scenarios in the probability of default of the individual overeign bonds and in the bonds’ climate spread. Finally, we estimate the largest gains/losses on the insurance companies’ portfolios conditioned to the climate scenarios. We find that the potential impact of a disorderly transition to low-carbon economy on insurers portfolios of sovereign bonds is moderate in terms of its magnitude. However, it is non-negligible in several scenarios. Thus, it should be regularly monitored and assessed given the importance of sovereign bonds in insurers’ investment portfolios.
    Keywords: insurance, climate risk, sovereign bonds
    JEL: G11 G12 G22
    Date: 2019–12
  3. By: Sowa, Frank
    Abstract: "In 2013, the Institute for Employment Research (IAB) evaluated as part of its statutory mandate, according to § 282 SGB III the voluntary unemployment insurance according to § 28a SGB III ('Antragspflichtversicherung'). First, this research project collected the assessments of managers and professionals from divisions of the Federal Employment Agency (BA). The research interest focused on the evaluation and implementation of the unemployment insurance upon request. Furthermore, the research project analysed the actual living conditions of solo self-employed and examined the role of the voluntary employment insurance to start a business and the relevance of social security systems for solo self-employed (unemployment insurance, health insurance, pension insurance). The study focuses on the group of solo self-employed as it is a particularly vulnerable group of self-employed." (Author's abstract, IAB-Doku) ((en))
  4. By: Christopher Busch; David Domeij; Fatih Guvenen; Rocio Madera
    Abstract: Recent studies have shown that idiosyncratic labor income risk becomes more left-skewed during recessions. This procyclical skewness arises from a combination of higher downside risk and lower chances of upward surprises during recessions. While this much is known, some important open questions remain. For example, how robust are these patterns across countries that differ in their institutions and policies, as well as across genders, education groups, and occupations, among others? What is the contribution of wages versus hours to procyclical skewness of earnings changes? To what extent can skewness fluctuations in individual earnings be smoothed within households or with government policies? Using panel data from the United States, Germany, Sweden, and France, we find four main results. First, the skewness of individual income growth (before-tax/transfer) is procyclical while its variance is flat and acyclical in all three countries. Second, this result holds even for full-time workers continuously employed in the same establishment, indicating that the hours margin is not the main driver; additional analyses of hours and wages confirm that both margins are important. Third, within-household smoothing does not seem effective at mitigating skewness fluctuations. Fourth, tax-and-transfer policies blunt some of the largest declines in incomes, reducing procyclical fluctuations in skewness.
    Keywords: idiosyncratic income risk, skewness, countercyclical risk
    JEL: D31 E24 E32 H31
    Date: 2020–05
  5. By: Simón Ramírez Amaya; Adolfo J. Quiroz; Álvaro José Riascos Villegas
    Abstract: High quality risk adjustment in health insurance markets weakens insurer incentives to engage in inefficient behavior to attract lower-cost enrollees. We propose a novel methodology based on Markov Chain Monte Carlo methods to improve risk adjustment by clustering diagnostic codes into risk groups optimal for health expenditure prediction. We test the performance of our methodology against common alternatives using panel data from 500 thousand enrollees of the Colombian Healthcare System. Results show that our methodology outperforms common alternatives and suggest that it has potential to improve access to quality healthcare for the chronically ill.
    Keywords: Risk adjustmenthealth insurance clusteringMarkov chain Monte Carlohealth expenditure
    JEL: C38 C6 I13 I18
    Date: 2019–10–31
  6. By: Caroline Hillairet (CMAP - Centre de Mathématiques Appliquées - Ecole Polytechnique - X - École polytechnique - CNRS - Centre National de la Recherche Scientifique); Olivier Lopez (LSTA - Laboratoire de Statistique Théorique et Appliquée - UPMC - Université Pierre et Marie Curie - Paris 6 - CNRS - Centre National de la Recherche Scientifique)
    Abstract: In this paper, we propose a general framework to design accumulation scenarios that can be used to anticipate the impact of a massive cyber attack on an insurance portfolio. The aim is also to emphasize the role of countermeasures in stopping the spread of the attack over the portfolio, and to quantify the benefits of implementing such strategies of response. Our approach consists of separating the global dynamic of the cyber event (that can be described through compartmental epidemiological models), the effect on the portfolio, and the response strategy. This general framework allows us to obtain Gaussian approximations for the corresponding processes, and sharp confidence bounds for the losses. A detailed simulation study, which mimics the effects of a Wannacry scenario, illustrates the practical implementation of the method.
    Keywords: Cyber insurance,emerging risks,counting processes,compartmental epi- demiological models,risk theory
    Date: 2020–05–05
  7. By: Julien Albertini (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Xavier Fairise (GAINS - Groupe d'Analyse des Itinéraires et des Niveaux Salariaux - UM - Le Mans Université); Anthony Terriau (GAINS - Groupe d'Analyse des Itinéraires et des Niveaux Salariaux - UM - Le Mans Université)
    Abstract: In the US, almost half of unemployment spells end through recall. In this paper, we show that the probability of being recalled is much higher among unemployment benefit recipients than nonrecipients. We argue that a large part of the observed difference in recall shares is accounted for by the design of the unemployment insurance financing scheme characterized by an experience rating system. We develop a search and matching model with different unemployment insurance status, endogenous separations, recalls and new hires. We quantify what would have been the labor market under alternative financing scheme. In the absence of the experience rating, the hiring and separations would have been higher in the long run and more volatile. Experience rating system contributes significantly to the difference in recalls between the recipients and the nonrecipients.
    Keywords: Search and matching,Layoffs,Recalls,Experience rating,Unemployment insurance
    Date: 2020
  8. By: Pashchenko, Svetlana; Porapakkarm, Ponpoje
    Abstract: A major challenge in the study of saving behavior is how to disentangle different motives for saving. We approach this question in the context of an entire life-cycle model. Specifically, we identify the importance of different saving motives by simultaneously accounting for wealth accumulation during working period, wealth decumulation during retirement, and labor supply behavior. We show that exploiting all of these data features can sharpen our identification, thus complementing previous studies that focus only on wealth accumulation or decumulation. We calibrate our model using several micro datasets and use the estimated model to evaluate the contribution of life-cycle, bequest, and precautionary motives to total savings. We also emphasize the importance of accounting for state-contingent assets when analyzing the precautionary saving motive.
    Keywords: savings, self-insurance, bequest motives, life-cycle models, medical spending
    JEL: D52 D91 E21 H53 I13 I18
    Date: 2020–04
  9. By: Budhi Surya; Wenyuan Wang; Xianghua Zhao; Xiaowen Zhou
    Abstract: This paper discusses Parisian ruin problem with capital injection for Levy insurance risk process. Capital injection takes place at the draw-down time of the surplus process when it drops below a pre-specified function of its last record maximum. The capital is continuously paid to keep the surplus above the draw-down level until either the surplus process goes above the record high or a Parisian type ruin occurs, which is announced at the first instance the surplus process has undergone an excursion below the record for an independent exponential period of time consecutively since the time the capital was first injected. Some distributional identities concerning the excursion are presented. Firstly, we give the Parisian ruin probability and the joint Laplace transform (possibly killed at the first passage time above a fixed level of the surplus process) of the ruin time, surplus position at ruin, and the total capital injection at ruin. Secondly, we obtain the $q$-potential measure of the surplus process killed at Parisian ruin. Finally, we give expected present value of the total discounted capital payments up to the Parisian ruin time. The results are derived using recent developments in fluctuation and excursion theory of spectrally negative Levy process and are presented semi explicitly in terms of the scale function of the Levy process. Some numerical examples are given to facilitate the analysis of the impact of initial surplus and frequency of observation period to the ruin probability and to the expected total capital injection.
    Date: 2020–05

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