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on Insurance Economics |
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Issue of 2020‒07‒27
fifteen papers chosen by Soumitra K. Mallick Indian Institute of Social Welfare and Business Management |
| By: | Stuart Andreason |
| Abstract: | From March 14 to 28, roughly 9.9 million people (when seasonally adjusted) filed new claims for unemployment insurance across the country.1 That represents roughly 3 percent of the entire population of the United States actively filing for unemployment insurance in two weeks. In addition, the vast proportion of people who are eligible for unemployment insurance do not make a claim. During “normal” times, the U.S. Bureau of Labor Statistics estimates that 74 percent of unemployed workers do not file a claim, primarily because they think they are not eligible for unemployment insurance. |
| JEL: | J64 J21 |
| Date: | 2020–04–02 |
| URL: | http://d.repec.org/n?u=RePEc:fip:a00034:88181&r=all |
| By: | Nicolas Ettlin (University of Basel, Actuarial Science, Department of Mathematics and Computer Science); Walter Farkas (University of Zurich - Department of Banking and Finance; Swiss Finance Institute; ETH Zürich); Andreas Kull (University of Basel, Actuarial Science, Department of Mathematics and Computer Science; BerninaRe Ltd.); Alexander Smirnow (University of Zurich - Department of Banking and Finance) |
| Abstract: | Risk transfer is a key risk and capital management tool for insurance companies. Transferring risk between insurers is used to mitigate risk and manage capital re- quirements. We investigate risk transfer in the context of a network environment of insurers and consider capital costs and capital constraints at the level of individual insurance companies. We demonstrate that the optimisation of profitability across the network can be achieved through risk transfer. Considering only individual in- surance companies, there is no unique optimal solution and, a priori, it is not clear which solutions are fair. However, from a network perspective, we derive a unique fair solution in the sense of cooperative game theory. Implications for systemic risk are briefly discussed. |
| Keywords: | risk transfer, risk-based capital, reinsurance, return optimisation, conditional expected shortfall |
| JEL: | G13 G22 D85 C57 C71 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2052&r=all |
| By: | Stuart Andreason |
| Abstract: | The COVID-19 pandemic has caused an unparalleled economic slowdown and record numbers of layoffs. Even casual economic observers have seen reports of millions of workers filing claims for unemployment insurance—between the weeks of March 21, 2020 and April 25, 2020, 19 percent of workers covered by unemployment insurance filed an initial claim—but what exactly does this mean for unemployment?1 It is important to understand exactly what an unemployment insurance (UI) claim represents and how it provides information on what is happening in the economy. |
| Keywords: | unemployment claims |
| JEL: | J64 |
| Date: | 2020–05–06 |
| URL: | http://d.repec.org/n?u=RePEc:fip:a00034:88180&r=all |
| By: | Magali Aubert (UMR MOISA - Marchés, Organisations, Institutions et Stratégies d'Acteurs - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - INRA - Institut National de la Recherche Agronomique - CIHEAM-IAMM - Centre International de Hautes Etudes Agronomiques Méditerranéennes - Institut Agronomique Méditerranéen de Montpellier - CIHEAM - Centre International de Hautes Études Agronomiques Méditerranéennes - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques); Geoffroy Enjolras (CERAG - Centre d'études et de recherches appliquées à la gestion - CNRS - Centre National de la Recherche Scientifique - UPMF - Université Pierre Mendès France - Grenoble 2 - UGA - Université Grenoble Alpes) |
| Abstract: | The purpose of this paper is to examine how crop insurance influences pesticide use, the two decisions being strategic for risk management at the farm scale. Using data from the Farm Accountancy Data Network (FADN), we consider French farms which cultivate field crops and wine-growing, the two main sectors that participate the most to crop insurance and that use intensively pesticides. The paper implements propensity score matching, difference-in-differences models and a combination of these two methods in order to compare populations of insured and non-insured farmers. The analysis is performed between 2008 and 2012 given a strategic change in the crop insurance system in 2010 that strongly incites farmers to purchase crop insurance with private companies. At the same time, pesticide use was progressively discouraged through public policies. Estimations show that while pesticide use decreases for all crops, the purchase of crop insurance policies softens this reduction for field crops and fasten it for wine-growing. These results emphasize a possible substitutability between crop insurance and pesticides as risk management tools. |
| Keywords: | crop insurance,fadn,france,pesticides |
| Date: | 2018–07–26 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-02736927&r=all |
| By: | Geoffroy Enjolras (CERAG - Centre d'études et de recherches appliquées à la gestion - CNRS - Centre National de la Recherche Scientifique - UPMF - Université Pierre Mendès France - Grenoble 2 - UGA - Université Grenoble Alpes); Magali Aubert (UMR MOISA - Marchés, Organisations, Institutions et Stratégies d'Acteurs - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - INRA - Institut National de la Recherche Agronomique - CIHEAM-IAMM - Centre International de Hautes Etudes Agronomiques Méditerranéennes - Institut Agronomique Méditerranéen de Montpellier - CIHEAM - Centre International de Hautes Études Agronomiques Méditerranéennes - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques) |
| Abstract: | The purpose of this paper is to examine how crop insurance influences pesticide use, the two decisions being strategic for risk management at the farm scale. Using data from the Farm Accountancy Data Network (FADN), we consider French farms which cultivate field crops and wine-growing, the two main sectors that participate the most to crop insurance and that use intensively pesticides. The paper implements propensity score matching, difference-in-differences models and a combination of these two methods in order to compare populations of insured and non-insured farmers. The analysis is performed between 2008 and 2012 given a strategic change in the crop insurance system in 2010 that strongly incites farmers to purchase crop insurance with private companies. At the same time, pesticide use was progressively discouraged through public policies. Estimations show that while pesticide use decreases for all crops, the purchase of crop insurance policies softens this reduction for field crops and fasten it for wine-growing. These results emphasize a possible substitutability between crop insurance and pesticides as risk management tools. |
| Date: | 2018–12–13 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-02734724&r=all |
| By: | Soheil Ghili (Cowles Foundation, Yale University); Ben Handel (Department of Economics, UC Berkeley); Igal Hendel (Department of Economics, Northwestern University); Michael D. Whinston (Department of Economics and Sloan School of Management, M.I.T) |
| Abstract: | Reclassiï¬ cation risk is a major concern in health insurance where contracts are typically one year in length but health shocks often persist for much longer. We theoretically characterize optimal long-term insurance contracts with one-sided commitment, and use our characterization to provide a simple computation algorithm for computing optimal contracts from primitives. We apply this method to derive empirically-based optimal long-term health insurance contracts using all-payers claims data from Utah, and then evaluate the potential welfare performance of these contracts. We ï¬ nd that optimal long-term health insurance contracts that start at age 25 can eliminate over 94% of the welfare loss from reclassiï¬ cation risk for individuals who arrive on the market in good health, but are of little beneï¬ t to the worst age-25 health risks. As a result, their ex ante value depends signiï¬ cantly on whether pre-age-25 health risk is otherwise insured. Their value also depends on individuals’ expected income growth. |
| JEL: | L5 I1 D0 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2218r&r=all |
| By: | Guner, Nezih; Kulikova, Yuliy; Valladares Esteban, Arnau |
| Abstract: | The added worker effect (AWE) measures the entry of individuals into the labor force due to their partners' job loss. We propose a new method to calculate the AWE, which allows us to estimate its effect on any labor market outcome. We show that without the AWE reduces the fraction of households with two non-employed members. The AWE also accounts for why women's employment is less cyclical and symmetric compared to men. In recessions, while some women lose their employment, others enter the labor market and find jobs. This keeps the female employment relatively stable. |
| Keywords: | Cyclicality; female employment; Household Labor Supply; Intra-household Insurance; Skewness |
| JEL: | D1 E32 J21 J22 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14346&r=all |
| By: | Olivier Cabrignac; Arthur Charpentier; Ewen Gallic |
| Abstract: | Family history is usually seen as a significant factor insurance companies look at when applying for a life insurance policy. Where it is used, family history of cardiovascular diseases, death by cancer, or family history of high blood pressure and diabetes could result in higher premiums or no coverage at all. In this article, we use massive (historical) data to study dependencies between life length within families. If joint life contracts (between a husband and a wife) have been long studied in actuarial literature, little is known about child and parents dependencies. We illustrate those dependencies using 19th century family trees in France, and quantify implications in annuities computations. For parents and children, we observe a modest but significant positive association between life lengths. It yields different estimates for remaining life expectancy, present values of annuities, or whole life insurance guarantee, given information about the parents (such as the number of parents alive). A similar but weaker pattern is observed when using information on grandparents. |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2006.08446&r=all |
| By: | Antonio Cabrales; Irma Clots-Figueras; Roberto Hernán-González; Praveen Kujal |
| Abstract: | Formal or informal institutions have long been adopted by societies to protect against opportunistic behavior. However, we know very little about how these institutions are chosen and their impact on behavior. We experimentally investigate the demand for different levels of institutions that provide low to high levels of insurance and its subsequent impact on prosocial behavior. We conduct a large-scale online experiment where we add the possibility of purchasing insurance to safeguard against low reciprocity to the standard trust game. We compare two different mechanisms, the private (purchase) and the social (voting) choice of institutions. Whether voted or purchased, we find that there is demand for institutions in low trustworthiness groups, while high trustworthiness groups always demand lower levels of institutions. Lower levels of institutions are demanded when those who can benefit from opportunistic behavior, i.e. low trustworthiness individuals, can also vote for them. Importantly, the presence of insurance crowds out civic spirit even when subjects can choose the no insurance option: trustworthiness when formal institutions are available is lower than in their absence. |
| Keywords: | institutions, trust, trustworthiness, voting, insurance |
| JEL: | C92 D02 D64 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8323&r=all |
| By: | Jaimovich, Nir; Saporta-Eksten, Itay; Siu, Henry; Yedid-Levi, Yaniv |
| Abstract: | During the last four decades, the U.S. has experienced a fall in the employment in middle-wage, "routine-task-intensive," occupations. We analyze the characteristics of those who used to be employed in such occupations and show that this type of individual is nowadays more likely to be out of the labor force or working in low-paying occupations. Based on these findings, we develop a quantitative, general equilibrium model, with heterogeneous agents, labor force participation, occupational choice, and investment in physical and automation capital. We first use the model to evaluate the distributional consequences of automation. We find heterogeneity in its impact across different occupations, leading to a significant polarization in welfare. We then use this framework as a laboratory to evaluate various public policies such as retraining, and explicitly redistributive policies that transfer resources from those who benefit from automation to those who bear the brunt of its costs. We assess the tradeoffs between the aggregate impact and welfare distributional consequences of such policies. |
| Keywords: | automation; labor force participation; Polarization; Retraining; Routine Employment; Unemployment insurance; universal basic income |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14362&r=all |
| By: | Spyridon M. Tzaninis; Nikolaos D. Macheras |
| Abstract: | Generalizing earlier works of Delbaen & Haezendonck [5] as well as of [18] and [16] for given compound mixed renewal process S under a probability measure P, we characterize all those probability measures Q on the domain of P such that Q and P are progressively equivalent and S remains a compound mixed renewal process under Q with improved properties. As a consequence, we prove that any compound mixed renewal process can be converted into a compound mixed Poisson process through a change of measures. Applications related to the ruin problem and to the computation of premium calculation principles in an insurance market without arbitrage opportunities are discussed in [26] and [27], respectively. |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2007.05289&r=all |
| By: | David R. Ba\~nos; Marc Lagunas-Merino; Salvador Ortiz-Latorre |
| Abstract: | One of the risks derived from selling long term policies that any insurance company has, arises from interest rates. In this paper we consider a general class of stochastic volatility models written in forward variance form. We also deal with stochastic interest rates to obtain the risk-free price for unit-linked life insurance contracts, as well as providing a perfect hedging strategy by completing the market. We conclude with a simulation experiment, where we price unit-linked policies using Norwegian mortality rates. In addition we compare prices for the classical Black-Scholes model against the Heston stochastic volatility model with a Vasicek interest rate model. |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2006.14833&r=all |
| By: | Rasmus Fatum (University of Alberta); Takahiro Hattori (Hitotsubashi University); Yohei Yamamoto (Hitotsubashi University) |
| Abstract: | We consider if the Chinese accumulation of reserves is associated with unintended consequences in the form of increased private sector risk taking. Using sovereign credit default swap spreads and stock index prices as indicators of risk taking we provide evidence to suggest that as reserve holdings increase, so does the willingness of the private sector to take on more risk. This is an important finding that adds credence to the suggestion that insurance through costly reserves, to be used in the event of a crisis, may lead to private sector actions that in and of themselves make it more likely that this insurance will be used. |
| Keywords: | International reserves; risk taking; China |
| JEL: | F31 G15 |
| Date: | 2020–05–17 |
| URL: | http://d.repec.org/n?u=RePEc:cth:wpaper:gru_2020_013&r=all |
| By: | Jenna Libersky; Elena Soyer; Télyse Masaoay; Margaret Coit; Rebecca Edelberg |
| Abstract: | This report summarizes the contents of the catalog, its data sources, and key findings. |
| Keywords: | Medicaid, telehealth, COVID-19 |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:b05241f0a6bc48f8b0a028bafd3f67cf&r=all |
| By: | Carolina Caetano; Gregorio Caetano; Juan Carlos Escanciano |
| Abstract: | We study identification and estimation in the Regression Discontinuity Design (RDD) with a multivalued treatment variable. We also allow for the inclusion of covariates. We show that without additional information, treatment effects are not identified. We give necessary and sufficient conditions that lead to identification of LATEs as well as of weighted averages of the conditional LATEs. We show that if the first stage discontinuities of the multiple treatments conditional on covariates are linearly independent, then it is possible to identify multivariate weighted averages of the treatment effects with convenient identifiable weights. If, moreover, treatment effects do not vary with some covariates or a flexible parametric structure can be assumed, it is possible to identify (in fact, over-identify) all the treatment effects. The over-identification can be used to test these assumptions. We propose a simple estimator, which can be programmed in packaged software as a Two-Stage Least Squares regression, and packaged standard errors and tests can also be used. Finally, we implement our approach to identify the effects of different types of insurance coverage on health care utilization, as in Card, Dobkin and Maestas (2008). |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2007.00185&r=all |