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on Insurance Economics |
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Issue of 2021‒11‒15
nine papers chosen by Soumitra K. Mallick Indian Institute of Social Welfare and Business Management |
| By: | Fahle, Sean; Barczyk, Daniel; Kredler, Matthias |
| JEL: | D1 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc21:242406&r= |
| By: | Marcos Escobar-Anel; Yevhen Havrylenko; Michel Kschonnek; Rudi Zagst |
| Abstract: | We analyze the potential of reinsurance for reversing the current trend of decreasing capital guarantees in life insurance products. Providing an insurer with an opportunity to shift part of the financial risk to a reinsurer, we solve the insurer's dynamic investment-reinsurance optimization problem under simultaneous Value-at-Risk and no-short-selling constraints. We introduce the concept of guarantee-equivalent utility gain and use it to compare life insurance products with and without reinsurance. Our numerical studies indicate that the optimally managed reinsurance allows the insurer to offer significantly higher capital guarantees to clients without any loss in the insurer's expected utility. The longer the investment horizon and the less risk-averse the insurer, the more prominent the reinsurance benefit. |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2111.03603&r= |
| By: | paremackal, Melbin P.M; Acharuparambil, Dr.Sumitha Franklin |
| Abstract: | ABSTRACT Insurance is vital to the households of a nation as it insulates them, to an extent from the unforeseen financial burdens. A well developed insurance sector is essential for the development of the nation, particularly the rural areas since the rural population being more vulnerable to calamities, income loss etc. Of the rural population, the SC/ST community being the less privileged, the study aims at assessing whether there is any significant difference in purchasing insurance between the general public and SC/ST community of rural areas. If there is, the study tries to explain what are the factors contributing to this and also the study gives an idea about the reach of socially oriented insurance programs of Government of India. |
| Keywords: | Insurance, SC,ST, Rural Population, General Category |
| JEL: | A10 |
| Date: | 2021–10–29 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110431&r= |
| By: | Stéphane Auray (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po); David L. Fuller |
| Abstract: | In this paper, we investigate the causes and consequences of "unclaimed" unemployment insurance (UI) benefits. A search model is developed where the costs to collecting UI benefits include both a traditional "fixed" administrative cost and an endogenous cost arising from worker and firm interactions. Experience rated taxes give firms an incentive to challenge a worker's UI claim, and these challenges are costly for the worker. Exploiting data on improper denials of UI benefits across states in the U.S. system, a two-way fixed effects analysis shows a statistically significant negative relationship between the improper denials and the UI take-up rate, providing empirical support for our model. We calibrate the model to elasticities implied by the two-way fixed effects regression to quantify the relative size of these UI collection costs. The results imply that on average the costs associated with firm challenges of UI claims account for 41% of the total costs of collecting, with improper denials accounting for 8% of the total cost. The endogenous collection costs imply the unemployment rate responds much slower to changes in UI benefits relative to a model with fixed collection costs. Finally, removing all eligibility requirements and allowing workers to collect UI benefits without cost shows these costs to be 4,5% of expected output net of vacancy costs. Moreover, this change has minimal impact on the unemployment rate. |
| Keywords: | Unemployment insurance,Take-up rate,Experience rating,Matching frictions,Search |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03385921&r= |
| By: | Sandrine Brèteau-Amores (BETA - Bureau d'Économie Théorique et Appliquée - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Marielle Brunette (BETA - Bureau d'Économie Théorique et Appliquée - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Christophe François (ESE - Ecologie Systématique et Evolution - CNRS - Centre National de la Recherche Scientifique - AgroParisTech - UP11 - Université Paris-Sud - Paris 11); Antoine Leblois (CEE-M - Centre d'Economie de l'Environnement - Montpellier - UMR 5211 - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Nicolas Martin-Stpaul (URFM - Ecologie des Forêts Méditerranéennes - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | Drought-induced risk of forest dieback is increasing due to climate change. Insurance can be a good option to compensate potential financial losses associated with forest production losses. In this context, we developed an ex ante index-based insurance model to cope with drought-induced risk of forest dieback. We applied this model to beech and oak forests in France. We defined and then compared different indices from simple ones relying on rainfall indices to more complex ones relying on the functional modelling of forest sensitivity to water stress. After the calibration of the contract parameters, an insurance scheme was optimized and tested. We showed that optimal insurance contracts generate low gain of certain equivalent income, high compensation, and a high basis risk. The best contract was not proportional to the complexity of the index. There was no clear advantage to differentiate contracts based on species. Results highlighting the various perspectives of this first approach are discussed at the end of this chapter. |
| Keywords: | Forest,Index insurance,Drought |
| Date: | 2021–10–25 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03401881&r= |
| By: | Matteo Malavasi (Department of Actuarial Studies and Business Analytics, Macquarie University, Australia); Gareth W. Peters (Department of Statistics and Applied Probability, University of California Santa Barbara, USA; Department of Actuarial Studies and Business Analytics, Macquarie University, Australia); Pavel V. Shevchenko (Department of Actuarial Studies and Business Analytics, Macquarie University, Australia; Center for Econometrics and Business Analytics, St. Petersburg State University, Russia); Stefan Tr\"uck (Department of Actuarial Studies and Business Analytics, Macquarie University, Australia); Jiwook Jang (Department of Actuarial Studies and Business Analytics, Macquarie University, Australia); Georgy Sofronov (Department of Mathematics and Statistics, Macquarie University, Australia) |
| Abstract: | In this study an exploration of insurance risk transfer is undertaken for the cyber insurance industry in the United States of America, based on the leading industry dataset of cyber events provided by Advisen. We seek to address two core unresolved questions. First, what factors are the most significant covariates that may explain the frequency and severity of cyber loss events and are they heterogeneous over cyber risk categories? Second, is cyber risk insurable in regards to the required premiums, risk pool sizes and how would this decision vary with the insured companies industry sector and size? We address these questions through a combination of regression models based on the class of Generalised Additive Models for Location Shape and Scale (GAMLSS) and a class of ordinal regressions. These models will then form the basis for our analysis of frequency and severity of cyber risk loss processes. We investigate the viability of insurance for cyber risk using a utility modelling framework with premium calculated by classical certainty equivalence analysis utilising the developed regression models. Our results provide several new key insights into the nature of insurability of cyber risk and rigorously address the two insurance questions posed in a real data driven case study analysis. |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2111.03366&r= |
| By: | Ishaan Bansal (IDInsight); Kanika Mahajan (Ashoka University) |
| Abstract: | Existing evidence shows that the Covid-19 pandemic has led to employed women witnessing larger losses in the labor market in India. We examine the heterogeneity that underlie these trends by studying the impact of Covid-19 induced income shocks on female employment. Using individual level panel data and a difference-in-differences strategy that exploits lockdown timing (April 2020) and accounts for seasonal employment trends, we find that women in households facing a hundred percent reduction in household male income during the lockdown were 1.5 pp (25%) more likely to take up work during the "unlockdown" months (June-August 2020). We also find these results to be predominant in poorer and less educated households. However, these positive employment trends are only transitory in nature with a reversal in female employment in these households from September 2020 onwards. These findings underscore the use of women's labor as insurance during low-income periods by poorer households. |
| Keywords: | Employment, COVID-19, income shocks, gender, India |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:ash:wpaper:69&r= |
| By: | Lisa D. Cook (Michigan State University); Linguère Mously Mbaye (African Development Bank); Janet Gerson (University of Michigan); Anthony Simpasa (African Development Bank) |
| Abstract: | Could initial – colonial and early post-colonial – conditions explain episodes of systemic crisis in banking systems today? We exploit differences in ethnic concentration of initial ownership and management structure of Nigerian banks established during the colonial era to examine banking crisis and vulnerability of the financial system in contemporary Nigeria. Although banking institutions emerged from or were a reaction to British colonial banking structure, they pursued different practices with respect to ownership and management structure. To measure these initial conditions, we use historical data from the Nigerian banking system to construct an index of diversity in the initial ownership and management structure of each bank, where more diversity corresponds to a lower concentration of insiders, including family members, tribal affiliates, and political partners. We collected data from the “Blue Books”, British colonial banking records from 1887 to 1940, data on indigenous banks established during the colonial period from 1929 to 1960, and data on banks from 1960 to 2016. These data allow us to track the first Nigerian families, ethnic groups, and their associates who were part of the formation of the formal banking institutions in the country. We also collect individual and aggregate bank data from 2001 to 2016 collected from bank balance sheets, financial statements, annual reports, statistical bulletins, banking supervision reports, and other reports of the Central Bank of Nigeria and the Nigeria Deposit Insurance Corporation. Our estimates suggest that lower levels of diversity are associated with higher levels of risk for a bank. That is, lack of initial diversity in ownership and management of Nigerian banks may have played a role in the performance and fragility of the Nigerian banking system that lent itself to systemic crisis. Our findings are consistent with the broader recent literature that shows higher profit and stronger performance of more diverse firms relative to less diverse firms due to, for example, diversity-driven innovation and product development. |
| Keywords: | Banks, financial institutions, banking crisis, financial crisis, colonial economic history, African economic history, social networks, Africa JEL classification: G21, G32, N47, N27, O16 |
| Date: | 2021–10–12 |
| URL: | http://d.repec.org/n?u=RePEc:adb:adbwps:2484&r= |
| By: | Andersson, Tommy (Department of Economics, Lund University); Enache, Andreea (Stockholm School of Economics); Erlanson, Albin (University of Essex); Thami, Prakriti (Department of Economics, Lund University) |
| Abstract: | This paper provides a theoretical model that captures the essential features of a Swedish health care reform where private and public health care providers serve patients with certain functional impairments, but where only private providers can reject service requests from patients. Since the hourly price compensation is fixed, this type of systems is expected to result in a monetary deficit for public providers (since they can not reject proposals from “unprofitable” patients). This paper proposes a more advanced pricing system and characterizes its optimal solution. A numerical analysis demonstrates that the deficit for the public provider can be substantially reduced without affecting the total budget. |
| Keywords: | health care services; public and private providers; multiple pricing; welfare |
| JEL: | C61 D47 D78 I11 |
| Date: | 2021–11–05 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lunewp:2021_014&r= |