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This article provides a framework for designing and evaluating corporate risk management and hedging programs. Corporate risk management has the potential to create substantial shareholder wealth by protecting companies from unexpected events that could force them to put their strategic investment plans on hold or even endanger their existence. However, assessing the performance of risk management, and how it is expected to increase the value of the enterprise, is a difficult undertaking because the costs of risk management tend to be much easier to quantify-indeed, they often appear directly on the firm's bottom line-than the benefits. The author begins by discussing how to evaluate the benefits and costs of a risk management program in general terms, and then focuses more directly on the assessment of corporate hedging programs, which are generally conducted with derivatives. In practice, there are many obstacles to designing and carrying out a successful hedging program. But one of the most common has been the tendency of top managements to insist that hedging programs be 'costless.' The author argues that just as the purchase of fire insurance is not viewed as waste of funds or a bad investment if the insured house does not burn down, the use of derivatives in a well-designed hedge should not be viewed as a mistake if the derivative position produces losses. To guard against this mistake, the people who design and implement risk management strategies must ensure that their CEOs and boards understand the possible outcomes of the strategy-including losses on derivatives position-and how the strategy itself increases the (expected) value of the firm. Further, management should attempt to communicate the principles underlying its risk management program and the value created by its hedging strategy to the investment community. [ABSTRACT FROM AUTHOR]

Consumers wanting to guard against losses resulting from unforeseen random events, decide to buy insurance. It is recognized that their decisions are often irrational. The aim of the study was to determine the importance attributed by consumers to the most important criteria when choosing insurance. The study was conducted by means of a diagnostic survey using the CAWI technique in January 2020 on a group of 150 people. The results showed that the most important factors which consumers are guided by when choosing their insurance are: price, attractiveness of the offer and terms of the contract. Konsumenci chcąc ustrzec się przed stratami wynikającymi z nieprzewidzianych zdarzeń losowych, decydują się na zakup ubezpieczenia. Uznaje się, że podejmowane przez nich decyzje często noszą znamiona irracjonalnych. Celem badania było określenie znaczenia przypisywanego przez konsumentów najważniejszym kryteriom decydującym o wyborze ubezpieczenia. Badanie przeprowadzono metodą sondażu diagnostycznego z wykorzystaniem techniki CAWI w styczniu 2020 roku na grupie 150 osób. Wyniki wykazały, że najważniejszymi czynnikami jakimi przy wyborze ubezpieczenia kierują się konsumenci są: cena, atrakcyjność oferty oraz warunki umowy.

Due to climatic hazards and extreme weather events, the pricing of property insurance products is increasingly attracting the attention of policyholders, insurance companies, and governments. Pricing based on market-oriented methods has to consider the affecting factors from policyholders’ perceived value. Pricing strategy design generates the need for natural hazards risk assessments. A natural hazard risk assessment is closely related to the human factors of a disaster-bearing body. In response to this need, we design an extension of the expected utility that is inconsistent with the additive expected utility, considering the human factors of policyholders, which is referred to as the expected loss utility (ELU). The ELU presents two improvements of the currently used utility. First, subjective probability, which is derived from individual predictions over acts, is applied to the ELU function to overcome the disadvantage that objective probability attaches to uncertainty does not reflect the uncertainty of human factors. Policyholders’ risk attitudes are reflected by the interpretation of interactions among uncertain events. Second, the hesitant fuzzy linguistic preference relation (HFLPR) is employed as the assessment of individual loss evaluation to reflect a policyholder’s hesitation. We apply the techniques of fuzzy linguistic term aggregation and perform a comparison to simplify our loss utility function. A detailed process of expected loss assessment is proposed due to variations in natural environment factors, local social characteristics, and disaster-bearing body factors. An illustrative example is given to perform a comparison with cumulative prospect theory to show the merits of the ELU. This study quantifies policyholder’s cognition of uncertain event and the cognition’s influence on risk assessment which can guide pricing strategy of property insurance products.

It has become standard practice in the non-life insurance industry to employ generalized linear models (GLMs) for insurance pricing. However, these GLMs traditionally work only with a priori characteristics of policyholders, while nowadays we increasingly have a posteriori information of individual customers available across multiple product categories. In this paper, we therefore develop a framework to capture this a posteriori information over several product lines using a dynamic claim score. More specifically, we extend the bonus-malus-panel model of Boucher and Inoussa (2014) and Boucher and Pigeon (2018) to include claim scores from other product categories and to allow for nonlinear effects of these scores. The application of the proposed multi-product framework to a Dutch property and casualty insurance portfolio shows that customers’ individual claims experience can have a significant impact on the risk classification. Moreover, it indicates that considerably more profits can be gained by accounting for their multi-product claims experience.

У статті здійснюється аналіз показників, які характеризують сучасний стан розвитку транспортного страхування в Україні, зокрема проаналізовано динаміку страхових премій та виплат за відповідними видами страхування за останні 4 роки. Досліджено основні складові даного виду страхування: автомобільне (автотранспортне), морське, авіаційне та страхування вантажів і багажу. Кожна з розглянутих складових має специфічні особливості, які вирізняють її серед інших видів майнового страхування. Виділено основні проблеми, які справляють негативний та дестабілізуючий вплив на розвиток транспортного страхування та запропоновано шляхи їх подолання.

Organizational form in insurance has been widely studied in the prior literature. Although researchers have recognized sub-types of stock insurers, mutuals have always been considered as a single homogeneous category. To the extent that mutual sub-types behave differently, considering all mutuals the same can result in misleading conclusions. The present study aims to remedy this gap in the literature by considering the full range of mutual firm types. Mutuals are classified as family-controlled, association-controlled, and pure mutuals with various sub-types within each group. We analyze corporate governance among mutual sub-types in the U.S. property–casualty (P–C) insurance industry by studying CEO turnover, particularly nonroutine turnover. Multinomial probit analysis is used to test for relationships between mutual sub-types and turnover. The principal finding is that all mutuals are not the same. The probability of nonroutine CEO turnover is lowest for family-controlled, non-association mutuals and highest for association-controlled mutuals. Non-association mutuals with family-member CEOs have the lowest turnover rates among all ownership types. Thus, future research should utilize more detailed organizational form categories than the traditional literature.

Investments in information technology (IT) have long been assumed to correlate positively with business value and market share. In response to these assumptions, firms invest in technology to improve various business functions to include customer service, profitability, and efficiency. However, despite these long-held beliefs, there is little consensus in the literature regarding how to measure the business value created by increased investment in information technology. Variability in firm type and individual organizational goals, data availability, and other factors may explain the lack of consensus in measurement. The authors investigate IT spending in the property and casualty (P&C) insurance industry. Specifically, the paper attempts to determine the factors that drive technology spending and the outcomes of information technology spending for P&C insurance firms. Additionally, this paper investigates whether technology spending increases market share for insurance firms in P&C insurance. This study identifies several factors unique to the P&C insurance industry that affect technology spending.

The aim of this study is to determine the factors that affect the financial performance of insurance market in Egypt. Return on Assets (ROA) and Return on Equity (ROE) were used as proxy for measuring financial performance. This study investigated the effects of company specific determinants such as: leverage, tangibility of assets, liquidity, company size, underwriting risk, and solvency margin on profitability by using multiple regression technique. Dependent variable was profitability measures, while independent variables were leverage, tangibility of assets, liquidity, underwriting risk, company size, and solvency margin. Secondary data obtained from the Financial Regulatory Authority (FRA) of insurance companies in Egypt were investigated as a panel data during the period from 2008 to 2017. The results illustrate that underwriting risk has insignificant effect on ROA, on the other hand, underwriting risk has significant effect on ROE. Liquidity has a negative effect on leverage and solvency margin. Also, there is a positive relationship between company size and ROA. Solvency margin has a positive significant effect on the profitability for Egyptian insurance market. In addition, the adverse and statistical relationship between solvency margin and leverage is important.

This article examines the determinants of cyber insurance participation, the amount of coverage offered and the performance of current cyber insurers. Our results support the competitive advantage hypothesis, but only partially support the business growth constraint hypothesis. We find that insurers offer cyber insurance to capitalise on their competitive advantage in understanding and pricing cyber risks. In particular, professional surplus insurers and insurers with surplus insurer affiliation demonstrate a competitive advantage in cyber insurance participation. We find limited evidence that insurers participate in cyber insurance to compensate for constraints on business growth. In addition, the type (standalone or packaged) and amount of coverage offered vary substantially across firm characteristics. Standalone coverage incurs higher loss ratios than packaged coverage, demonstrating its riskier nature. Changes in cyber insurance loss ratios are not driven by premium growth but by claim frequency and severity growth, emphasising the significance of cyber insurance policy design.

PurposeFrom the perspective of cause and effect, the operational processes of property insurance companies can be considered as historical events. The purpose of this study is to measure the operating efficiency of China's property insurance industry, explore the determinants that affect technical efficiency and outline the path to achieving high-quality development.Design/methodology/approachWe chose 44 Chinese property insurance companies as research objects. The data were obtained from the Chinese Insurance Yearbook and China Statistical Yearbook 2015–2017. First, the data envelopment analysis (DEA) method was used to calculate the technical efficiency of property insurance companies. Then, Tobit regression and quantile regression were adopted to explore the influencing factors of technical efficiency. Finally, the fuzzy-set qualitative comparative analysis (fsQCA) method was employed to summarize the path to improving the operating efficiency of property insurance companies.FindingsThe empirical results in the first stage suggested that the operation efficiency of China's property insurance industry was technically inefficient, and the scale efficiency was relatively better than the pure technical efficiency. In the second stage, we observed that the drivers for firm size, reinsurance rate, claim ratio and equity restriction were important determinants of an insurance firm's efficiency.Research limitations/implicationsWe also put forward four applicable, targeted and proven ways to improve the technical efficiency of property insurance companies. These configurations are verified by cases of existing property insurance companies, which can provide practical references for the insurance industry.Originality/valueOur research enriches the insurance literature and efficiency methods, particularly regarding the specific paths of improving the technical efficiency. The relationship between elements and results is analyzed from a systematic perspective, and the research results are not only more consistent with what logic might imply but also more instructive for the improvement of reality.

The subject of this research is the trend in development of the insurance market of China in the context of digitalization of modern financial and economic sectors. China's insurance market is quite large and promising in comparison with the markets of other countries. The listed factors define the relevance of studying its development and key trends. A synoptic analysis is conducted on the situation in China’s insurance market, including its evolution, structure, and primary market indicators, status of the leading market actors, impact of digitalization on the market, and future trend. The novelty of this work consists in a new perspective upon evolution and current state of the insurance market of China, as well as in generalization of digital development and future trends. The conclusion is made that digital technologies presented by big data, artificial intelligence, blockchain, etc., brought profound changes to the image of China's insurance industry, as well as became a new driving force for the development of an entire sector. The wave of digitalization in financial and economic sphere would contribute to the development of insurance sector, create and broaden new demands in risk management, as well as provide technical support that turns challenges into opportunities for the insurance industry. Despite the fact that over the recent years China's insurance sector has faced multiple challenges, it demonstrates the long-term development prospects.

In insurance practice, claims often occur in clusters and their arrivals may depend on various external and time-dependent factors. In this article, we propose a statistical approach for modeling c...

We examine an insurer’s portfolio allocation choice in the context of a regulatory environment where investment in specific asset classes is constrained. We use a year- and insurer- specific proxy, the Investment Regulatory Stringency Index, to show that property and casualty insurers operating in more stringent regulatory environments allocate a smaller proportion of their investment portfolio to taxable assets. Given the market conditions, the environmental risks, and the economic pressure of the period under study, theory suggests the demand for taxable securities would otherwise be greater. We infer from this result that regulation is restricting investment in taxable assets in an undesirable manner. This result is consistent with prior literature. Lastly, we find that operational risk management can mitigate the investment constraints imposed by regulation.

States levy insurance premium taxes, which are essentially gross receipt taxes on premiums. An unusual characteristic of insurance premium taxes is that in each state in which an insurance company writes premiums, the firm pays the higher of the tax rate in the state in which the company is domiciled and the state in which the policy is written. Thus, the choice of location has a significant effect on the firm's tax liability. Using firm‐level data for the property‐casualty (P‐C) insurance industry, we calculate the firm‐specific tax rate for each P‐C firm for every possible state of domicile. We estimate conditional logistic models to analyze the effect of insurance premium taxes on the choice of the state of domicile of existing and relocated firms. We find robust evidence of a small, negative, and statistically significant effect of these taxes on the choice of the state of domicile.

The implementation of the Sarbanes–Oxley (SOX) Act in 2002 imposed a wide range of new oversight standards seeking to assure greater accuracy and transparency in the financial reporting of publicly traded firms in the U.S. This research assesses the relationship that the implementation of SOX shares with loss reserve estimation accuracy in the U.S. property-casualty insurance market. Using a comparative difference-in-difference approach, this research finds that, while publicly traded insurers have indeed experienced a significant reduction in loss reserve errors subsequent to SOX, the reduction is not attributable to SOX. These results hold true under a handful of robustness analyses.

ispartof: International Journal of Trade, Economics and Finance pages:138-143 status: Published online

The Defendant defended that according to Article 22 of the Insurance Law, when lodging a claim with the insurer for payment of indemnities or insurance benefits in accordance with the insurance contract after the occurrence of an event, the insured should provide to the insurer all proofs and information he could provide pertinent to determining the nature or cause of, the extent of the losses due to, and other circumstances of the insured event.

We test for the causal impact of analyst coverage on corporate risk-taking in the property and casualty insurance sector, using the exogenous change in analyst coverage introduced by broker closures and mergers. We find that a decrease in analyst coverage promotes an increase in insurers’ risk-taking, which is mainly driven by insurers with smaller initial analyst coverage and those operating in an environment of lower product market competition. We also show that the decrease in analyst coverage causes more risky investment behaviors, more risky underwriting, and less conservative reserving practice.

In broad terms, insurance is a form of risk management. While there are myriad types of insurable risks, the authors focus on those personal risks that most commonly can disrupt or devastate individual and, by extension, family financial planning. Those risks are associated with health, life, property, and personal liability for negligent acts or omissions. The authors discuss key concepts and definitions related to insurance and then explore how best to analyze and utilize the following forms of insurance: health insurance, including through COBRA; disability insurance; life insurance, including term insurance and permanent insurance; long-term-care insurance; and property and casualty insurance, including personal excess liability and umbrella insurance.

The Plaintiff shipowner contracted to acquire vessel insurance from two Defendant insurers. When Plaintiff’s vessel, M/V “Jin Ye 88” encountered a storm that occasioned total loss of the ship, the Plaintiffs filed an insurance claim to recover the value for which they had contracted.

The Plaintiff insured its M.V. LIAN RUN 6 with the Defendant insurer for both hull and machinery risks and Protection and Indemnity (P&I) cover against liability. M.V. LIAN RUN 6 was involved in a collision, as a result of which the other vessel sank. The Plaintiff instituted limitation proceedings and constituted a fund using money advanced by the Defendant. The Plaintiff also had M.V. LIAN RUN 6 repaired, and claimed the cost of repairs from the Defendant under its hull insurance cover. There was a dispute about the total repair cost, and the Defendant also argued that any liability of the Plaintiff for indirect losses sustained by the owner of the other ship in the collision should be deducted from the amount of the indemnity it was required to pay, because liability for indirect losses was excluded under the policy. Held – the Defendant’s evidence about the reasonable cost of the repairs to M.V. LIAN RUN 6 should be preferred to the Plaintiff’s, because the Defendant’s evidence was supported by an independent appraisal. The Defendant was liable for the full amount of constituting the limitation fund, regardless of whether that fund included liability for indirect losses. It was irrelevant that the Plaintiff filed its claim after the limitation period had expired, because the Defendant admitted its intent and willingness to indemnify the Plaintiff after the limitation period had expired.

Background of the study: The economic activity of business entities is almost always associated with a particular turnover of property, assets. By making such transactions, entrepreneurs can be exposed to dangers. Therefore, today, in times of not only large man-made disasters, pandemics, the main tasks of any subject of the economic market include not only making a profit, but also preserving property and capital in integrity. Purpose of the study: To define property insurance as a type of economic activity, establish a balance of interests of insurance business participants, identify unresolved issues and propose ways to improve legislation in the sphere of insurance. Methods: The methodological basis of the research is a set of general scientific and private scientific methods of research activity, including historical, formal logic, the method of system analysis, scientific research, comparative legal, statistical, functional and structural, methods of analysis and synthesis, as well as empirical and theoretical-analogy and deduction. Results and novelty: As a result of the research, the authors formulated the provisions and conclusions that contribute to the effective regulation of insurance relations and ensure the balance of interests of insurance business participants. The article substantiates the need to qualify a reinsurance contract as a property insurance contract along with other types named in Article 929 of the Civil Code of the Russian Federation.

The determination of insurance compensation liability involves accident cause, insurance coverage, exclusions of (contractual and statutory) insurance liability, influence degree of insurance risk, etc.

The question of the legal nature of liability insurance is a subject of constant attention, given the specificities of this type of insurance relating to the subject matter of insurance, the status of the insurer in the contract, the goal of the insured to be reached by concluding the contract on this type of insurance, the obligation to report the occurrence of the insured event, the status of the third injured party, etc. The author gives several opinions on the legal nature of this type of insurance, and also analyzes many institutes regarding the conclusion and execution of liability insurance contracts. The liability insurance belongs to the property insurance, but there are many differences. These differences lead to more questions, which primarily concern the liability of the insured as a subject matter of insurance, the possibility for a third injured party to make a direct claim for compensation against the insurer, and the limited amount of insurance. Particular attention is paid in the paper to the relationship of the insured and the insurer, as well as the relationship of the third injured party and the insurer. In addition, the author refers to certain provisions of the Act on Obligations in this area, as well as the provisions of the German Act on Insurance Contracts, which regulates in a much more detailed way some issues related to the legal nature of liability insurance. The paper concludes that liability insurance also includes the public interest, which relates to the protection of third parties, whether or not they can be determined.

Summary In property insurance, a contract often provides the policyholder with protection against damages to the insured properties that arise from a variety of perils. We propose a multivariate framework for pricing property insurance contracts with multiperil coverage in a longitudinal context. Specifically, a two-part model is employed to accommodate the excess of 0s and heavy tails in the insurance loss cost, and a Gaussian copula with a structured correlation is used to capture the dependence within and between perils, as well as their interaction. Using the government property insurance data from the state of Wisconsin in the USA, we show that the multiperil claim model has important implications in both experience rating and risk margin analysis.

The modern insurance market of Ukraine, in comparison with foreign countries, shows rather low development indices. However, the role of insurance in the financial development of the state is one of the determining factors, as it is possible to achieve equal distribution and redistribution of financial resources, to ensure reduction of state expenses in case of emergency situations and effective development of social protection. Purpose. The purpose of the article is the research of a condition and features of functioning of the property insurance market in Ukraine at the present stage. As a result of the conducted research it became possible to emphasize the problem points of insurance activity performance as a whole and property insurance in particular. It has allowed to designate prospects of optimization of activity of the given segment of the national insurance market. Methodology. In course of the research the following methods were used: dialectical method – to clarify the importance of the studied issue among the scientists; horizontal analysis method – to consider the dynamics of indices of property insurance market performance by certain types of insurance objects; vertical analysis method – to determine the role of property insurance sector in the insurance market of Ukraine; induction method – to draw conclusions. Results. Indices of the insurance market activity in Ukraine are analyzed and the basic tendencies of its development are defined in the article. From the critical position the peculiarities of functioning of the property insurance sector were assessed: both within the segment by types of insurance objects and in general, against the background of other types of insurance. The analysis made it possible to identify the problematic aspects and drawbacks of the property insurance activity that contributed to the development of offers on improvement of insurance activity in the property insurance sector. Practical significance. The practical application of the proposed methods of reducing gaps in property insurance would make it possible to increase the potential of the state insurance market and facilitate the growth of the level of confidence of the population in insurance as an instrument of their own security and equalization of their financial position in case of unexpected events.

Subrogation is a legal right characteristically reserved by property insurers. Subrogation occurs in property insurance and in some particular cases of liability insurance. The doctrine of subrogation operates to ensure protection of certain specific principles relevant to the property insurance including the principle of indemnification whereby the compensation received is no more and no less than a full indemnity for the insured loss or damage suffered by the insured due to loss occurrence, the principle of non-cumulation in terms of claims under the same insurance contract and the principle which excludes claiming indemnity from the person who is legally responsible for causing the loss, because otherwise the insurance contract may be an unjustified source of profit for the insured as the insured would get double recovery or paid out twice for the same claim.With the payment of the reimbursement from an insurance agreement on the insurer, all rights that the insured has towards the persons responsible for the damage up to the amount of the paid compensation are transferred. With the subrogation, the insurer takes up the legal position of the insured person and exercises his right to subrogation from the rights of the insured (derivative acquisition of the right), so that the insurer exceeds the claims in scope and amount as the insured had towards the perpetrator.Subrogation is the right of the insurer, it is not his obligation. The insurer is not obliged to use this right to transfer the rights to the responsible person.The notion of subrogation is often associated with the concept of insurance regression. But there is a difference between these two terms: recourse is the right of the insurer to claim the amount of compensation that he has paid to the insured (injured parties) from the harmful person, while subrogation is the transfer of the right (the claim for damages to the responsible person) from the insured to the insurer up to the amount of the compensation paid on the basis of an insurance contract. The right to recourse is a consequence of the existence of subrogation, i.e. transfer of the rights of the insured person to the responsible person, and which is reached by the law itself.Тhe subrogation doctrine also operates to ensure that the defendant or the person who is legally responsible for the loss shall not be absolved of liability under the civil law. Namely, the perpetrator should bear the consequences of his liability for the caused damage, and therefore the legislator of the insurer (as one of the contractual parties in insurance contract) has recognized the right what he has paid the injured party (as the contractual party in the insurance contract called the insured) to calm from the perpetrator.Furthermore, subrogation doctrine operates to ensure profit for the insurance companies whereby the reimbursement funds the claims or sum insured are covered from additionally grow; therefore, this doctrine is of great importance to the insurers.

Reinsurance is the primary source of interconnectedness in the insurance industry. As such, reinsurance connectivity provides a transmission mechanism for financial shocks and potentially exposes insurers to contagion and systemic risk. In this article, connectivity within the U.S. property–casualty (P/C) reinsurance market is modeled as a network. We model the network of all primary insurers and reinsurers in the market. We analyze all bilateral reinsurance counterparty relationships (domestic and foreign) of U.S. P/C insurers, and we model both intra‐ and intergroup transactions. We extend the prior literature by providing a detailed examination of the reinsurance network structure, including network density, network components, centrality of individual insurers, and sub‐network analysis for top insurers. Our analysis of contagion and insolvency risk reveals that even the failure of the top 10 in‐degree or in‐strength insurers with 100 percent loss given default would not lead to widespread insolvencies in the U.S. P/C insurance industry.

We perform two tests that estimate the mass of the upper tail of the distribution of aggregate US tropical cyclone damages. Both tests reject the hypothesis that the distribution of damages is thin tailed at the 95% confidence level, even after correcting for inflation and growth in population and per capita income. Our point estimates of the shape parameter of the damage distribution indicate that the distribution has finite mean, but infinite variance. In the second part of the paper, we develop a microfoundations model of insurance and storm size that generates a fat tail in aggregate tropical cyclone damages. The distribution of the number of properties within a random geographical area that lies in the path of a tropical cyclone is shown to drive fat tailed storm damages, and we confirm that the distribution of coastal city population is fat tailed in the US. We show empirically and theoretically that other random variation, such as the distribution of storm strength and the distribution of damages across individual properties, does not generate a fat tail. We consider policy options such as climate change abatement, policies which encourage adaptation, reducing subsidies for coastal development, and disaster relief policies, which distort insurance markets. Such policies can reduce the thickness of the tail, but do not affect the shape parameter or the existence of the fat tail.

The purpose of this article is to determine the influence of the portfolio structure on the stability of insurance companies’ activity. With this objective, we examined how the structure of insurance portfolio affects the risks of companies’ activity.The author has proved that if insurance companies focus on voluntary property insurance it increases the probability of revocation of their licenses. These results were derived from a binary logistic regression using 112 observations. Parameters of insurance portfolio, as well as regional macroeconomic indicators that reflect the operating environment of the insurance business were used as variables for the model. Indicators of the insurance portfolio include voluntary and compulsory insurance. In the course of the research, it was revealed that one of the possible directions of development of insurance market regulation may be the organization of the mechanism of supervision over insurance companies, which allows soft impact on the structure of insurance portfolios in order to increase the stability of insurers. The introduction of this approach in regulation will allow the Bank of Russia to stimulate the development of the insurance market. Based on the results of the presented study, the Bank of Russia may develop guidelines to determine the optimal structure of the insurance portfolio. These recommendations can be one of the means of the surveillance policy over insurance companies. The orientation of the insurance company to certain types of insurance determines the stability of its functioning. In this regard, the Bank of Russia should develop an early warning system for disrupting the smooth functioning of the insurance company due to an incorrect focus on certain types of insurance.

The Indonesian Financial Services Authority (OJK) has instructed all insurance providers in Indonesia to apply a mandatory tariff for property insurance. The tariff has to be uniformly applied and the rule of set the maximum and minimum premium rates for protection against losses. Furthermore, the OJK issued the new rule regarding self-retention and domestic reinsurance. Insurance companies are obliged to have and implement self-retention for each risk in accordance with the self-retention limits. Fluctuations of total premium income and claims may lead the insurance company cannot fulfil the obligation to the insured, thus the company needs to conduct reinsurance. Reinsurance helps protect insurers against unforeseen or extraordinary losses by allowing them to spread their risks. Because reinsurer chargers premium to the insurance company, a properly calculated optimal retention would be nearly as high as the insurer financial ability. This paper is aimed at determining optimal retentions indicated by the risk measure Value at Risk (VaR), Expected Shortfall (ES) and Minimum Variance (MV). Here we use the expectation premium principle which minimizes individual risks based on their quota share reinsurance. Regarding to the data in an insurance property, we use a bivariate lognormal distribution to obtain VaR, ES and MV, and a bivariate exponential distribution to obtain MV. The bivariate distributions are required to derive the conditional probability of the amount of claim occurs given the benefit has occurred.

The National Flood Insurance Program (NFIP), housed in the Federal Emergency Management Agency, has been providing flood insurance to households and businesses for almost 50 years. To inform the policy discussion leading up to reauthorization, this article analyzes five aspects of the NFIP: (1) risk modeling and risk communication, (2) the roles of the public and private sector, (3) take†up rates, (4) incentives for risk reduction, and (5) rate setting and the financing of catastrophic flood events. Suggestions for reform are discussed.

This paper aims to adopt the real options approach to the fire risk management decision-making of alternative fire insurance and fire security services in the context of the fire loss frequency uncertainty. This paper constructs a three-stage model to analyze the frequency of fire loss with a dynamic viewpoint and examines the ten years fire loss data of an international city to propose the optimal timing to buy fire insurance or install a fire security system. The research findings can serve as a reference to the fire insurance companies and fire security service providers in the design of new products and service offerings. The results, supported with many cases in real life, can offer insight to decision makers.

Insurable interest should be considered to constitute a requirement for the validity of an insurance contract. Due to the fact that the difficulties experienced with regard to the doctrine are not unique to South Africa, a comparative approach was adopted that entailed a detailed discussion regarding the definition and application of the doctrine in Great Britain and Australia.

We empirically analyze whether federal disaster aid crowds out household purchase of disaster insurance. We combine data on annual household flood insurance purchases for the United States over the period 2000–2011 with data from the two main U.S. post-disaster federal aid programs (FEMA's Individual Assistance grants and SBA's low interest disaster loans). Estimating both fixed-effects and instrumental variable models to account for the endogeneity of disaster assistance grants, we find that receiving individual assistance grants decreases the average quantity of insurance purchased the following year by between $4000 and $5000. The reduction we find is roughly 3% of the mean insurance coverage in the sample but larger than the average flood-related IA grant in our sample, which is $2984. IA is currently limited and larger grants could have different impacts. The crowding out is on the intensive margin; we find no impact on take-up rates, likely because there is a requirement that recipients of disaster aid purchase an insurance policy. We do not know how take-up rates might change without such a requirement. Low interest post-disaster government loans have no systematic effect on insurance purchases.

We examine the relation between loss reserving errors, leverage and reinsurance in the UK's property-casualty insurance industry. We find that financially weak insurers under-estimate reserves to reduce leverage, and so pre-empt costly regulatory scrutiny. However, at very high leverage, insurers over-reserve, suggesting a non-linear relation between leverage and reserving policy. We also investigate whether monitoring by reinsurers reduces reserving errors, and find that highly reinsured insurers are less likely to make loss reserve errors. However, the use of proportional reinsurance does not affect loss reserve accuracy.

Natural disasters affect not only families and businesses, but also governments and insurance companies. They cause major losses and encourage insurers to take various measures to stabilize their technical performance. This paper aims to examine the impact of natural disasters on the United States (U.S) Property/Casualty insurance profitability for the 2008–2012 period. The results obtained indicate that volume of capital and premium to surplus ratio have a significant positive impact on profitability. While, loss ratio, unexpected frequency and blockbuster have a negative effect on insures’ profitability.

In the recent insurance literature, a variety of finite-dimensional parametric models have been proposed for analyzing the hump-shaped, heavy-tailed, and highly skewed loss data often encountered in applications. These parametric models are relatively simple, but they lack flexibility in the sense that an actuary analyzing a new data set cannot be sure that any one of these parametric models will be appropriate. As a consequence, the actuary must make a non-trivial choice among a collection of candidate models, putting him/herself at risk for various model misspecification biases. In this paper, we argue that, at least in cases where prediction of future insurance losses is the ultimate goal, there is reason to consider a single but more flexible nonparametric model. We focus here on Dirichlet process mixture models, and we reanalyze several of the standard insurance data sets to support our claim that model misspecification biases can be avoided by taking a nonparametric approach, with little to no cost, compared to existing parametric approaches.

Es indiscutible la importancia que tienen los seguros en Nicaragua y en el mundo. Importancia que se materializa a nivel personal, ya que otorga seguridad y satisfacción a las personas; a nivel familiar ya que concede estabilidad en el hogar y a nivel nacional ya que los seguros operan corno impulsores de la economía nacional tal como lo hace la banca.Sin embargo en Nicaragua no poseemos, aún, una legislación especializada aplicable a los seguros (ni al derecho de seguro, ni al contrato de seguro), salvo unas disposiciones obsoletas contenidas en el Código de Comercio y en algunas resoluciones de la Superintendencia de Bancos, ahora bien, se aprobó una Ley General de Seguros, Reaseguros y Fianzas, que en lugar de dinamizar y regular la actividad asegurativa en Nicaragua, lo que hace es estar enteramente encaminada a responder a las exigencias establecidas por organismos internacionales y por el Tratado Libre Comercio entre Estados Unidos Centroamérica como parte signataria del TLC (DR-CAFTA), aprobado y ratificado por nuestra Asamblea Nacional, asumiendo entre otros compromisos, el contenido en el Anexo 12.9.2, sección F, numeral 7; quedando así por fuera, lo relativo a la regulación de los contratos de seguros y a la solución de posibles situaciones jurídicas que puedan nacer entre el asegurado y el asegurador-, entre los Intermediarios de Seguros y entre los beneficiarios, en su caso.Al aprobar esta Ley, quedaron muchos vacíos y deficiencias que serán expuestas, de manera técnica y objetiva, en este artículo investigativo. Desde luego no expondré todos aquellos títulos ni capítulos ni artículos de la Ley, sino aquellos que sean de mayor relevancia para la actividad del Intermediario de Seguro, de las Empresas Aseguradoras y del Contrato de Seguro.