Search

Rank-based procedures are commonly used for inference in copula models for continuous responses whose behavior does not depend on covariates. This paper describes how these procedures can be adapted to the broader framework in which (possibly non-linear) regression models for the marginal responses are linked by a copula that does not depend on covariates. The validity of many of these techniques can be derived from the asymptotic equivalence between the classical empirical copula process and its analog based on suitable residuals from the marginal models. Moment-based parameter estimation and copula goodness-of-fit tests are shown to remain valid under weak conditions on the marginal error term distributions, even when the residual-based empirical copula process fails to converge weakly. The performance of these procedures is evaluated through simulation in the context of two general insurance applications: micro-level multivariate insurance claims, and dependent loss triangles.

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.

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.

This article comments on the South African Insurance Bill, 2016. It examines the constitutional obligations imposed on the legislature when enacting legislation using existing jurisprudence, it argues that the Insurance Bill is unconstitutional to an extent that it omits to incorporate, a transformation policy that is designed to transform the insurance industry and address the economic imbalances of the past. The article recommends that Parliament should include a clear transformation objective in the Insurance Bill.

The object of property insurance is interest related to possession and disposal of property. Insurance of cultural property is perhaps one of the most personal types of services that are provided by insurers, because every work of art or an old thing is unique. Collecting antiques and works of art has long become for some people not just a hobby, but also an investment of money. Therefore at present this type of insurance is increasing popular in the territory of Russia. The creation and implementation of a new "insurance product" is an expensive business, entailing great risks. The insurance product should be understandable to the client; therefore the work of the insurance company should be aimed at adapting the introduced type of insurance to certain groups of consumers. The development of requirements for a new insurance product is a process of determining its properties meeting the insurer's needs to the greatest extent and corresponding to the customer's preferences. To date, insurers can offer to client an insurance policy not only for standard property, but also for rare and unusual, which also includes items such as antiques, luxury goods, musical instruments and jewelry. The article is focused on considering and conducting analysis of new methods for expanding the product range of property insurance (for example, insurance of luxury goods and antiques), and storage conditions. The authors also emphasize the assessment stages of categories.

Reinsurance is a vital financial device for enhancing underwriting capacity, ceding risks, and mitigating financial distress. By supplying financial resources and services, reinsurance can facilita ...

Over the last 11 years, the Law Commission and the Scottish Law Commission have worked on a joint project to modernise the law of insurance contracts. Due to the size of the project, the Law Commissions proceeded in phases and separated out specific issues for legislative reform. Their proposals have already resulted in the Consumer Insurance (Disclosure and Representations) Act 2012 and the Insurance Act 2015 which brought about significant changes for consumer and non-consumer insureds and insurers alike. This paper examines two further areas of reform: the introduction of an implied term about payment of insurance claims by insurers within a reasonable time and a statutory restatement of the doctrine of insurable interest. It considers the old and new substantive law and provides an insight into the reform process.

Over the last two decades, Bayesian methods have been widely used in general insurance applications, ranging from credibility theory to loss-reserves estimation, but this literature rarely addresses questions about the method’s asymptotic properties. In this paper, we review the Bayesian’s notion of posterior consistency in both parametric and nonparametric models and its implication on the sensitivity of the posterior to the actuary’s choice of prior. We review some of the techniques for proving posterior consistency and, for illustration, we apply these results to investigate the asymptotic properties of several recently proposed Bayesian methods in general insurance.

An analysis of Ukrainian insurance market for vehicle owners’ civil liability is carried out in the article. The main purposes of insurance coverage for compulsory insurance of vehicle owners’ liability are defined. The key issues of bringing a compulsory insurance of vehicle owners’ civil liability into line with European standards are defined. Stages of implementation of key aspects of bringing a compulsory insurance of vehicle owners’ civil liability into line with European guidelines are studied. An implementation of compulsory insurance of vehicle owners’ civil liability is associated with the need to compensate the damage of life, health and/or property of injured in the accident and the protection of property interests. The level of compulsory insurance of vehicle owners’ liability in the insurance market of Ukraine lags behind the level of foreign markets. In terms of European integration, there is an urgent need to find ways of bringing a compulsory insurance of vehicle owners’ civil liability into line with European standards. The results of the analysis of domestic market of compulsory insurance of vehicle owners’ civil liability could argue that implementation of reform measures is realized for all purposes to bring the market into line with European standards . This research may be useful as a part of the program of Ukrainian insurance market development, which will contribute to national economic development and will have confidence and be competitive in the global insurance market .

Insurance premium subsidies and disaster relief payments are government actions that can help to smooth farmers’ incomes between years. In the EU crop insurance based on public–private partnership is promoted. We present an analysis based on farmers’ stated preferences with split data approach of crop insurance and disaster relief provided by the government. Results reveal that farmers’ willingness to pay for crop insurance is conditional on the prospect for government disaster relief. Results show that possibility for disaster relief payments will lead to extensive use of taxpayers’ money if crop insurance premiums are subsidized.

Relevance of the article is determined that the effective functioning of the reinsurance market greatly depends on the development of its infrastructure because it creates opportunities for implementation of reinsurance services, mediates, accelerates and facilitates placement and execution of reinsurance contracts. Given the state of the domestic insurance market mediation necessary means to enhance its development and integration into the global reinsurance market. The article is a study of measures to enhance the role of mediation in the insurance market of Ukraine. The article provided a critical assessment of the legal status of insurance mediation in Ukraine. Factors that determine its role in the insurance market of Ukraine. Established quantitative and cost indicators of intermediation of brokers in insurance and reinsurance, given their logical explanation. Suggestions to create appropriate conditions for the development of mediation in the insurance and reinsurance markets in Ukraine. Mediation plays an important role in the development of the insurance market of Ukraine since: helping the participants to choose the most optimal proposal for the establishment of additional guarantees of the insurance liabilities; strengthening partnerships and trust between the reinsurer and the reinsurer; improves the quality and dynamics of sales reinsurance services; supports a healthy competitive environment in the reinsurance market. It was established that the quantitative and cost indicators of intermediation of brokers in insurance and / or reinsurance in Ukraine do not match. By number of deals leadership position with insurers-residents, the cost - non-resident reinsurers. The most attractive segment for mediation turned provision of agreements with non-resident reinsurers for property insurance. To create the appropriate conditions for the development of mediation in the insurance and reinsurance markets of Ukraine should: increase transparency of brokers to introduce their professional liability insurance and the formation of guarantee funds.

The aim of the article is to identify the determinants of what risk retention technique companies select in the context of property insurance demand. The analysis was based on the assumption that it is possible to seek motives for retention among the determinants of companies’ demand for insurance. Empirical data collected from a survey of a representative sample of medium and large enterprises operating in Poland provided valuable feedback for the research. An econometric model was built to identify factors considered when a company is deciding to employ partial insurance or total non-insurance, and determinants of the selection of risk retention technique. It considers not only company financial figures, but also information on the current insurance programme it has in place and the satisfaction it expresses with regard to its insurance services.

Flood insurance has remained unavailable in Canada based on an assessment that it lacks economic viability. In response to Canada's costliest flood event to date in 2013, the Canadian insurance industry has started to develop a framework to expand existing property insurance to cover flood damage. Research on flood insurance has overlooked why and how insurance systems transition to expand insurance coverage without evidence of economic viability. This article will address this gap through a case study on the emergence of flood insurance in Canada, and the approach to its expansion. Between 2013 and 2016, insurance industry officials representing over 60% of premiums collected in Canada were interviewed. These interviews revealed that flood insurance is being expanded in response to institutional pressure, specifically external stakeholder expectations that the insurance industry will adopt a stronger role in managing flood risk through coverage of flood damage. Further evidence of this finding is explored by assessing the emergence of a unique flood insurance model that involves a risk-adjusted and optional product along with an expansion of government policy supporting flood risk mitigation. This approach attempts to balance industry concerns about economic viability with institutional pressure to reduce flood risk through insurance. This analysis builds on existing research by providing the first scholarly analysis of flood insurance in Canada, important “empirical” teeth to existing conceptual analysis on the availability of flood insurance, and the influence of institutional factors on risk analysis within the insurance sector.

IntroductionInsurance remains a relevant contributor to the economic growth. It offers a reduction of anxiety and more effective management of risk as well as promotes financial stability by mobilisation of savings and more efficient capital allocation [Outreville 1990; Skipper 1997; Liedtke 2007; Han et al. 2010, p.184-185; Albouy & Blagoutine 2011, p.467-469; Haiss & Sumegi 2008; Curak, Loncar & Poposki 2009]. However, the contribution of the insurance sector to the economy depends on the development of the insurance system, which is sensitive to many factors. In particular, from a macro perspective, the development of a giv- en national non-life insurance market is influenced by favorable or unfavorable economic conditions and globalization processes that release the flow of capital and spread of knowledge. Another area of influence is represented by riskspecific conditions. For example, natural catastrophes have a power to enhance the cyclicality of an insurance market, followed by changes of insurance premiums and availability of coverage. The behavior of insurance consumers is also a relevant factor, with changing attitudes to the need of insurance protection in the first place. It is worth to note that the development of the non-life insurance sector is also related to the situation of real estate, motor and bank loan markets.If considering the European Union countries, the current state of the development of the national non-life insurance markets differs significantly. In particular, there is a group of transition countries which are specific due to some aspects of the non-life market development. The purpose of this study is to evaluate these changes in a group of the eight transition countries from the region of Central and Eastern Europe (CEE). This study contributes to the existing academic debate as there is a clearly identifiable research gap within crossnational studies on the performance of non-life insurance markets. The available cross-country comparative studies usually address the whole insurance sector (aggregated data), which is discussed further in the first section of this paper. By addressing exclusively the situation of the non-life markets, the evaluation provided in this study offers an insight into a segment of insurance market which is of particular importance for companies and households.Additionally, it should be noted that the studies on the development and contribution of the insurance sector in transition countries, also remain rare in academic literature. Such studies gain considerably lower attention, when compared to other aspects of financial system performance (banking sector or capital markets). This cognitive gap may be at least partially fulfilled by this study, as it deepens some relevant aspects related to the performance of non-life markets in selected CEEs as transition economies. Non-life insurance markets in CEE countries remain specific in some aspects, although they overcame considerable changes, stimulated by the process of harmonization with the European Union. In this context, the problems subject to closer evaluation in this study correspond with three broad areas of concern. The first is presented in this paper (as the first part of the study) and addresses the market structure from a product-oriented point of view. The second area of concern refers to the polarization of insurance markets from a cross-country comparative perspective, whereas the third focuses on market concentration. The latter two aspects will be discussed in a separate paper (as the second part of this study).The paper is organized as follows. The first section provides an overview of the accessible previous research related to the development of insurance markets in the transition countries. The second section of the paper presents the design of research and its methodology. In particular, it explains the adopted approach to the study structure, selection of sample, sources of data, as well as the timeframe of analysis. …

Houses are the primary asset for Chinese rural families. However, dramatically increasing frequency and severity of floods have caused significant loss in rural houses recently, and there is generally no insurance available. In this article, we investigate the rural residents’ willingness to buy insurance according to a national survey. The results show that there exists a strong need for flood insurance in rural China, and the influencing factors in the insurance demand include the recent frequency of floods, income, and past experience with lack of flood insurance. Policy suggestions for flood insurance are provided for the insurance industry and Chinese government.

This paper explores the economic issues related to systemically important insurance companies, using an example from the Great Depression, the National Surety Company. National Surety was a large and diverse insurance company that experienced a major crisis in 1933 due to losses from its guarantees of mortgage-backed securities. A liquidity crisis ensued, as policyholders staged a massive run on the company, demanding the return of their unearned premiums. The New York State Insurance Commissioner stepped in with a reorganization plan that split the company in two, out of fear that a disorderly liquidation would have systemic consequences given the sheer number of the company's counterparties, scattered all across the United States. A key dynamic of the crisis was that policy holders at an insurance company have a dual role as holders of liabilities and as providers of income.

This paper presents evidence on moral hazard in auto insurance using a panel data set on all auto insurance companies in Korea. In January 2010, Korean financial regulatory authorities suddenly changed the automobile bonus-malus system such that the threshold of the premium surcharge for collision coverage was increased by 300 per cent, while insured parties’ payments of loss remains unchanged. One year later, however, claimants were required to bear 20 per cent of the loss. This sudden and exogenous regulatory change provides an ideal environment to analyse moral hazard because of the natural setting of the experiment. The empirical results obtained through a fixed-effects model indicate that a rise in the threshold led to a rapid increase in the loss ratio, and the subsequent imposition of coinsurance requirements decreased the loss ratio even after controlling for the number of accidents and claims.

Aim: Actuaries are financial engineers who construct arrays of risk models combining mathematical techniques in order to carry out required actuarial calculations, such as reserve valuation and pricing. The main purpose is to identify some reliable models which price risk factors embedded in insurance products. Health insurance products which are very different in nature from life insurance products must be examined and priced carefully. This paper discusses predominantly two risks. Excess claims ratio and Rectangularisation risks. Background: The first author, Dr. S. Jayaprakash was responsible for Enterprise Risk Management with MetLife India. He was earlier associated with Life Insurance Corporation of India & Oracle Financial Services. Dr. P. K. Dinakar, the second author, qualified as Fellow of the Institute of Actuaries of India, was Chief Actuary of MetLife India Insurance. He was earlier associated with Life Insurance Corporation of India & Birla Sunlife. The third author, Dr. Michael Ha, FSA, MAAA, CFA, CPA (Australia), FRM, PRM, LLM, was Vice President of Strategic Business Initiatives Units at ING Life Insurance in its Taiwan operation. He started his actuarial career at MetLife, Canada. Earlier, the first and third authors worked on a research paper titled “Modeling Policyholder Behavior through Insurance Resonant Marts for Pricing Options and Guarantees” [1] which was presented at the 5th World Congress on Engineering and Technology. The seven authors decided to collaborate on the current research paper for health insurance design and financing purposes.

Indonesia is disaster-prone countries. Then the disaster mitigation and adaptation, with insurance as one available option, need to be considered. Insurance scheme can be applied as an alternative to allocate the burden of disaster cost, not only to government and households but also to insurance companies. This study examines the ability to pay of the households for the insurance program in different provinces using the data of the Survei Sosial Ekonomi Nasional (Susenas] for the year 2010. The result is there are some provinces with high vulnerability index but low ability to pay for insurance expenses; and vice versa. Potential spending on average for catastrophe insurance is at 2.8 percent i.e. the portion of household expenditures that potentially. can be allocated to disaster premium insurance payments.

Benefiting from access to detailed data on the federally run National Flood Insurance Program for the entire state of Georgia, USA, we analyze residential flood insurance purchasing behavior in that state over more than three decades (1978–2010). The demand for flood insurance on an extensive margin, based on take-up rates, is found to be relatively price inelastic. Aligned with the behavioral economics literature, recent flood events temporarily increase purchases, but this effect fades after 3 years. We also find that the proportion of developed area in floodplains has a significant positive impact on insurance take-up rates. Contrary to what is often assumed, we do not find evidence that insurance purchase and mitigation efforts are substitutes. Educated individuals, individuals over the age of 45, and African-Americans are, all else equal, more likely to purchase flood insurance.

Insurance law can be difficult to navigate—especially when new legislation is being introduced. Adam Bernstein spoke to the head of insurance at an international law firm, to shed some light on how the Insurance Act 2015 affects care homes here in the UK

This paper describes the challenges that consumers, insurers and insurance regulators face in dealing with insurance for low-probability, high-consequence events. Given their limited experience with catastrophes, there is a tendency for all three parties often to engage in short-term intuitive thinking rather than long-term deliberative thinking when making these insurance-related decisions. Public–private partnerships can encourage investment in protective measures prior to a disaster, deal with affordability problems and provide coverage for catastrophic risks. Insurance premiums based on risk provide signals to residents and businesses as to the hazards they face and enable insurers to lower premiums for properties where steps have been taken to reduce risk. To address issues of equity and fairness, homeowners who cannot afford insurance could be given vouchers tied to loans for investing in loss reduction measures. The National Flood Insurance Program provides an opportunity to implement a public–private partnership that could eventually be extended to other extreme events.

The paper deals with a complete analysis of the liability of the insurer in the international carriage of goods. The paper lays down the international instruments that govern the field and to what extent they affect the liability of the insurer. The paper also analyzes the conflict of laws issues related to the international insurance. The paper further does a study of the concepts related to the international insurance of carriage of goods and liability of the insurer. The focus has been on the common law principles. A person, in his normal course of life, is fundamentally exposed to unlimited perils to his interests. The causes of such perils are plenty such as nature’s own doings and more arising out of economic activities. Such risks are inevitable and have to be tackled in a systematic method. The nature and the instincts of the man has enabled him to conceive appropriate means to tackle such kinds of risks. One such means is the apparatus of insurance, which may be applied between two parties by way of a contact.In law and economics, insurance is a form of risk control primarily used to hedge against the risk of a contingent, uncertain loss. "Insurance" is the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. A contract of insurance would be a contact wherein one party (the insurer) promises in return for a money consideration to pay to the other party (the insured) money or money’s worth on the happening of an uncertain event more or less adverse to the interest of the insured. Insurance is also defined as “a contract whereby, for specified consideration, one party undertakes to compensate the other for a loss relating to a particular subject as a result of the occurrence of designated hazards”. In Clarke v Clarke it was defined as “A contract by which one party undertakes, in consideration for a payment (called a premium), to secure the other against pecuniary loss, by payment of a sum of money in the event of the death or disablement of a person.”Therefore an individual seeks to reduce the potential risk by entering into a contract of insurance; this can be called the main purpose of the contract of insurance. The law of insurance, though appears to be a branch of contract law, is treated as a different branch of law all together. In Prudential Insurance Co. v. IRC Channel J. stated that the contract of insurance have to have the payment of sum, periodical or lump sum, made by one party (policyholder) as consideration to other, and the other party in return agrees to indemnify the policyholder against any loss caused by an event that is adverse to the interest of the policyholder. It is a contract of indemnity and it is necessary to have an insurable interest in the contract otherwise the contract becomes a wagering agreement and thus void.The business of insurance has grown over the period of time and in this era of globalization it has taken a totally new look. International carriage of goods is an area where insurance is very essential, there is always a risk of damage or loss of goods, or even delay that might cause loss. The seller and the buyer either can get insured depending on the terms of their contract and sometime also for personal satisfaction.The paper analyses different aspects related to the liability of the insurance company in the international carriage contracts. The paper first will deal with the application of principles of conflict of laws and how these concepts affect the liability of the insurer. The second part of the paper deals with the instruments governing the insurance law. The third part deals with liability of the insurance company in the contract of insurance, this will cover concepts like duty of utmost good faith (Uberrimae Fidei), loss etc.; this part will also focus on different instruments like Marine Insurance Act, 1906. Since the topic is very vast thus a detailed analysis of many head under the paper is not possible, though the author has tried to give a fair treatment to each concept. Due to this reason a comparative analyses of different legal regimes was not possible under this paper. The nature of such contract is similar to other insurance contracts, with a slight divergence in the case of Marine Insurance (the most important type of insurance in international carriage of goods is marine insurance).

Many governments provide financial assistance for reconstruction of damaged housing units after a disaster in order to prevent vulnerable households from falling into poverty traps or entering low growth cycles. To lessen these risks and the overall financial burden on the public sector after extreme events, private insurance schemes provide one viable solution. In this paper, the possible effects of such solutions are assessed for District 1 of Shiraz, Iran, based on recent probabilistic earthquake risk modelling. The work explicitly focuses on the financial vulnerability of different household groups as well as possible increases in premiums due to uncertainties in the underlying risk model through the use of loading factors. The results are compared with current non-probabilistic-based premiums that are used by most insurance companies in Iran, and recommendations are given as to which schemes may fit best or could be affordable for society to manage future earthquake risks.

Prevention policies against flood, such as dams or levees, are commonly designed by local jurisdictions and for most, they exert externalities on neighbouring jurisdictions. We study a model in which each jurisdiction chooses its collective prevention effort depending on the flood risk and on the insurance system that covers its inhabitants. As compulsory uniform insurance depends on all insureds’ risk, it enables partial integration of prevention externalities by jurisdictions. We determine under which conditions compulsory uniform insurance Pareto dominates risk-rated insurance.

Since 1968, homeowners’ flood insurance in the United States has been mainly provided through the federally-run National Flood Insurance Program (NFIP). The Flood Insurance Reform Act of 2012 raises the possibility of moving coverage to the private sector, assuming the market can price this risk effectively and that premiums reflect risk. This paper provides the first large-scale quantification of risk-based premiums for over 300,000 residences prone to either storm surge or inland flooding using commercially developed probabilistic catastrophe models, and compares these premiums with those currently charged by the NFIP. Our findings reveal significant differences between the two. In some areas, the NFIP charges prices that are more than 15 times the pure premium, while other areas are charged up to three times less than the pure premium. The paper discusses the market and policy implications of these findings.

This paper re-examines the evidence in favour of the existence of underwriting cycles in property and casualty insurance and their economical significance. Using a meta-analysis of published papers in the area of insurance economics, we show that the evidence supporting the existence of underwriting cycles is misleading. There is, in fact, little evidence in favour of insurance cycles with a linear autoregressive character. This means that any cyclicality in firm profitability in the property and casualty insurance industry is not predictable in a classical econometric framework. It follows that pricing in the property and casualty insurance industry is not incompatible with that of a competitive market.

A conference on Convergence, Interconnectedness, and Crises: Insurance and Banking was held at Temple University in Philadelphia from December 8 to 10, 2011. The conference was cosponsored by Temple University's Advanta Center for Research on Financial Institutions, SCOR Group, The Canada Research Chair in Risk Management, HEC Montreal, CIRPEE (Quebec, Canada), and The Journal of Risk and Insurance. Seventeen research papers and two keynote addresses were presented at the conference, and six papers from the conference are published in this symposium. The conference key note addresses were delivered by Denis Kessler, Chairman and CEO of SCOR Group, and Andrew W. Lo, Harris & Harris Group Professor of Finance, MIT Sloan School of Management. The Financial Crisis of 2007-2010 revealed significant interrelationships both within and between the insurance and banking industries that contributed significantly to the magnitude of the crisis and the resulting government bailout. The need for additional research on interconnectedness provided the motivation for the Conference. The objective was to help minimize or avoid future crises through careful scholarly explorations of these interconnections. Researchers from around the world spent 3 days delving into numerous insurance and banking topics, ranging from systemic risk to implications of financial services mergers to extreme correlations within the insurance industry. The introductory article in this symposium, by Denis Kessler, is based on his keynote speech at the Conference. In his article, Kessler argues that the (re)insurance industry is not a significant source of systemic risk. Kessler emphasizes that (re)insurance failures are very rare, orderly, long-term processes, unlike banking crises, which are short term and associated with panics. He points out that a failing (re)insurance company does not terminate its contracts overnight but continues to settle claims. Thus, (re)insurance failures do not require sudden liquidation of assets and liabilities, as in the case of many banking failures. One reason that banks are susceptible to systemic risk is the interbank lending market, where risk is strongly concentrated due to a network of very short-term, bilateral exposures. In contrast, the structure of the (re)insurance market is hierarchical, in the sense that primary insurers cede a single risk to many other reinsurers, which in turn often cede it to different retrocessionnaires. In contrast to retail bank deposits and wholesale market bank funding, (re)insurance reserves are not instantaneously puttable and thus cannot be redeemed on demand by policyholders. Also unlike banks, which tend to borrow short term and lend long term, (re)insurers' asset and liability maturities tend to be well matched. Therefore, regulators should resist the temptation to put (re)insurers in the same category as banks and other financial institutions. Neither insurers nor reinsurers create significant systemic risk. Therefore, Kessler argues, designating (re)insurers as systemically important financial institutions (SIFIs) would reduce insurers' and reinsurers' profitability at the expense of solvency. The second article in the symposium is a macro-overview analysis of systemic risk in the insurance industry by J. David Cummins and Mary A. Weiss. Their article examines the potential for the U.S. insurance industry to cause systemic risk events that spill over to banking or other segments of the economy. They examine primary indicators of systemic risk as well as contributing factors that exacerbate vulnerability to systemic events. The evaluation of systemic risk is based on a detailed financial analysis of the insurance industry, its role in the economy, and the interconnectedness of insurers. Insurers are shown to have very low default risk and low susceptibility to financial crises. However, life insurers have higher leverage and more exposure to asset-backed securities and illiquid privately placed bonds than property-casualty (P-C) insurers. …

The paper presents algorithms for insurance technical provisions taking into account losses, which are incurred but not reported. Evaluation of insurance technical provisions for the kinds of insurance, such as Motor Third Party Liability (MTPL) Insurance, Property Insurance and some others, have difficulties in assessing the impact of the losses from insurance claims incurred requiring a longer time for the settlement of insurance claims. These insurance requirements are mainly associated with health insurance in the MTPL Insurance, losses related to compensation for moral injuries, as well as on life care and life-long pension. To run these payments, you need to know the financial indicators for the period of settlement of loss (such as the effective interest rate, investment income, etc.) In the article the procedures for the most accurate forecast possible losses for the expected excess of loss amount for a treaty year are provided, using the loss experience of the previous years of the occurrence with their development. However, certain adjustments should be made to take account of the impact of losses from previous years for the current period. This article describes how outstanding losses have to be projected on a year of reporting, so that they are correspond to the current values

In the wake of the financial crisis, the insurance sector has been overlooked. Ralph SI Koijen and Motohiro Yogo shed new light on the rise of shadow insurance and increasing risk levels in American life insurance markets

This article examines the impact of organizational structure on risk taking across different lines of property insurance (fire, marine, vehicle and specialized property insurance) in Sweden from 1913 to 1939. Based on the theoretical arguments whereby the mutual organizational form has a competitive advantage in underwriting homogeneous but unknown risk distribution, while the stock organizational form is more likely to underwrite more volatile and heterogeneous risk categories, we conclude that organizational form has a significant impact on risk taking. Our empirical analysis shows that the risk taking, measured as incurred claims to anticipated losses, was on average lower among mutual insurers. When comparing across lines of insurance, the analysis shows that the mutual form was more successful in keeping down risks in fire and marine, while less so in vehicle and specialized property insurance. Stock companies mitigated the higher risk by ceding more premiums to reinsurers and by diversifying more across different lines of insurance.

Since the passage of the Terrorism Risk Insurance Act of 2002, corporate terrorism insurance is sold as a separate policy from commercial property coverage. In this article, we determine whether companies differ in their demand for property and terrorism insurance. Using a unique data set of insurance policies purchased by large U.S. firms, combined with financial information of the corporate clients and of the insurance provider, we apply a two-stage least squares approach to obtain consistent estimates of premium elasticity of corporate demand for property and terrorism coverage. Our findings suggest that both are rather price inelastic and that corporate demand for terrorism insurance is significantly more price inelastic than demand for property insurance. We further find a negative relation between the solvency ratios of both property and terrorism risk coverage, with a stronger effect on the latter, indicating that companies use their ability to self-insure as a substitute for market insurance. Our results are robust to the application of alternative estimators as well as changes in the econometric specifications.

States levy insurance premium taxes, which are essentially gross receipt taxes on premiums, with insurers paying the higher of the tax rate in the state in which the company is domiciled and the st...

Claim settlement is one of the most important parts of the life insurance services. Person who is holding or planning for the life insurance will always want to have prompt claim settlement. For any insurance company sales of insurance policies is the biggest source of revenue and if claim are not properly settled then it will affect its sales. The study is based on the secondary data collected from IRDA annual report and it shows that LIC of India continue to grow due to its prompt claim settlement, highest insurance premium collections and highest number of policies sold.

Automobile insurance is a compulsory purchase for most drivers in Europe and the United States. Obviously, this obligation raises concerns about affordability and availability. To mitigate such problems, in most legal systems special facilities have been created, either by policymakers or by insurance companies, to deal with risks that are very difficult to insure or are even considered uninsurable on the commercial market. We (1) provide an overview of special schemes in several European countries, (2) examine the potential advantages of reducing the number of uninsured drivers and investigate the influence of the special schemes on the decision of individuals to drive (un)insured, (3) examine the consequences of these schemes for the incentives of drivers and (4) discuss the social costs of the special schemes.

This paper examines the characteristics that determine demand for microinsurance when individuals have personal or observed experience with a rare weather event: the severe 2010 flooding in Pakistan. Using a sample of 384 individuals (192 in flood-affected and 192 non-affected villages matched using pre-flood propensity data), we combine post-flood survey data with behavioural experiments to test the impact of prior loss experience on willingness to purchase insurance. In the framed experiment setting, we allow participants to choose insurance payments through many rounds of random flood losses, testing whether experiment behaviour is significantly related to real-world experience or observation and whether individuals change insurance demand after experiencing losses. We find that 2010 flood-affected individuals demand significantly more insurance than non-affected individuals, and that both personal losses and observations of others’ losses are significant determinants of demand, when controlling for location-specific flood propensity, pre-flood mitigation, information sources, post-flood assistance, exogenous changes in assets, potential migrant attrition and other household characteristics. Having prior experience with less severe floods before the 2010 event also increases insurance demand, although the effect disappears when controlling for 2010 flood. Contrary to expectation, household beliefs that insurance is non-Islamic are not found to be a significant barrier to take-up.

This article brings up a very important and current issue concerning the insurance of pharmacists and pharmacies. The aim of the research undertaken was to present the range and factors determining the choice of insurance products for pharmacies and pharmacists operating in Olsztyn. The study is focused on products ensuring protection for the properties owned and used in pharmacies, as well as third-person liability insurance related to the business activity and to the professional practice of a pharmacist. It identifies the most popular insurances in the examined population and specifies the factors determining their choice.

This paper develops a theoretical model to identify various risks in the Chinese property insurance market. Consequently, we apply a structural VAR model to quantify the magnitude, historical timing of these risks, and their dynamic impacts on the permanent and transitory components of the insurance premiums. The results indicate that the enormous amount of speculative funds flowing into China has aggravated insurance premiums as well as helped accelerate market volatilities due to its uncertain nature to the domestic economy and its short-term characteristic of investing. In particular, the speculative shock is shown to be the primary factor responsible for the transitory fluctuation of insurance premiums while the supply shock explains the preponderance of insurance premiums’ permanent growth in recent years.

The central place occupied by actuarial calculation in insurance is usually understood as resulting from the process of bringing the laws of large numbers to bear on archival data in terms of an ‘insurance imaginary’. However, little attention is paid to the political and broader governmental conditions upon which actuarialism rests. Analysis of fire insurance in Australia indicates that despite urgings from other branches of insurance, the industry did not go down this ‘scientific’ track until well into the twentieth century. Instead, it relied on detailed individual inspection by insurance agents and a process of ‘cumulative dangerousness’ – adding up the multiple hazards discovered in each case and using this as a guide to setting premiums. The result was slow, expensive and cumbersome. But the industry was forced to adopt this approach because the built environment in Australian cities was so underregulated that nothing could be taken for granted. Only when adequately designed and enforced government ...

Financial institutions face various cyclical risks, but very few studies have analyzed the cyclicality of operational risk. External fraud is an important operational risk faced by insurers. In this research, we analyze the empirical relationship between insurance fraud and the business cycle and we concentrate our study on two insurance contracts that may create an incentive to defraud. We find that residual insurance fraud exists both in the contract with replacement cost endorsement and the contract with no-deductible endorsement in the Taiwan automobile theft insurance market. These results are consistent with previous literature on the relationship between fraud activity and non-optimal insurance contracting. We also show that the severity of insurance fraud is countercyclical. Fraud is stimulated during periods of recession and mitigated during periods of expansion. Although this last result seems intuitive, our contribution is the first to measure its significance.

We examine the relationship between natural disasters, political risk and insurance market development in a panel of 39 countries over the period 1984–2009 using a dynamic panel two-step system generalised method of moments model. We provide evidence that the incidences of natural disasters and deaths caused by natural disasters lead to greater total insurance, as well as life insurance and non-life insurance consumption. We also find that countries with lower levels of political risk experience higher insurance consumption. The incidences of natural disasters and deaths attributable to natural disasters contribute to insurance market development under the tenure of a government with lower levels of political risk. We therefore emphasise that natural disasters, political risk and their interaction effects are important determinants of insurance market development.