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The Geneva Risk and Insurance Review is a professional academic journal on risk and insurance sponsored by the Geneva Association, with 1 volume per year, 2 issues per volume, and 4 articles published in each issue, with an impact factor of 1 in 2022-20235。The journal is aimed at scholars in the field of economics in universities and research institutions, and supports and encourages research on risk, uncertainty and insurance in economics by providing a platform for the effective exchange of research results and opinions. Areas of focus include: the economics of insurance products and markets;Decision Theory under Uncertainty;Individual, corporate and social risk sharing or risk mitigation mechanisms;Market failures related to risk sharing and mitigation mechanisms, including those caused by information frictions and incentive issues;and the role of social insurance in managing risk through regulation or provision, among others.
Table of Contents of Issue 1.
a pandemic business interruption insurance
mental health changes and the willingness to take risks
probability weighting and insurance demand in a unified framework
cognitive abilities and life insurance holdings: evidence from 16 european countries
a pandemic business interruption insurance
Pandemic Business Interruption Insurance
Author
Alexis Louaas (École Polytechnique), Pierre Picard (École Polytechnique).
Abstract:We analyze how pandemic business interruption coverage can be put in place by building on capitalization mechanisms and a portfolio management strategy as evidenced with covid-19, pandemics affect economic sectors in differentiated ways: some are very severely affected because their activity is he**ily impacted by tr**el bans and constraints on work organization, while others are more resistant. this opens the door to risk-coverage mechanisms based on a portfolio of financial securities, including long-short positions and options in stock markets. we show that such a strategy allows insurers to offer business interruption coverage in pandemic states, while simultaneously hedging the risks associated with alternating bullish and bearish non-pandemic states. these conclusions contrast sharply with the idea of governments being the only solution to the pandemic insurability problem. they are derived from a theoretical model of corporate risk management, and their practical relevance is illustrated by numerical simulations, using data from the french stock exchange.
We analyze how pandemic business interruption insurance can be achieved by establishing capitalization mechanisms and portfolio management strategies. Covid-19 proves that the pandemic affects sectors of the economy in different ways: some sectors have been severely affected because their activities have been severely affected by travel bans and restrictions on the organization of work, while others have a certain degree of resistance. This opens the door to a risk coverage mechanism based on the financial portfolio, including long and short positions and options in the market. We demonstrate a strategy that allows insurers to be able to provide business interruption coverage in the face of a raging pandemic, while hedging the risk of alternating bull and bear market non-pandemic scenarios. This is in stark contrast to the view that it is the only solution to the problem of pandemic insurance. These conclusions are obtained through a theoretical model of corporate risk management, the practical relevance of which can be illustrated by numerical simulations using data from the French ** exchange.
Original link:mental health changes and the willingness to take risks
Mental health change and willingness to take risks
Author
Lu Li (University of Munich), Andreas Richter (University of Munich), Petra Steinorth (University of Hamburg).
Abstract:utilizing the longitudinal soep data representative of the German population, we find that mental health shocks significantly decrease the willingness to take risks we also find that mental health improvements increase the willingness to take risks significantly. our findings are relevant for better understanding the economic decision **of the large number of individuals with mental health issues.
Using longitudinal SOEP data representative of the German population, we found that mental health shocks significantly reduced risk-taking intentions. At the same time, we also found that improvements in mental health significantly increased risk-taking intentions. Our findings have important implications for a better understanding of the economic decision-making of a large number of individuals with mental health issues.
Original link:probability weighting and insurance demand in a unified framework
Probabilistic weighting and insurance demand under a unified framework
Author
johannes g.Jaspersen (University of Munich), Richard Peter (University of Iowa), Marc ARagin, University of Georgia
Abstract:We provide a comprehensive analysis of the impact of probability weighting on optimal insurance demand in a unified framework we identify decreasing relative overweighting as a new local condition on the probability weighting function that is useful for comparative static analysis. we discuss the effects of probability weighting on coinsurance, deductible choice, insurance demand for low-probability, high-impact risks versus high-probability, low-impact risks, and insurance demand in the presence of nonperformance risk. probability weighting can make better or worse predictions than expected utility depending on the insurance demand problem at hand.
We comprehensively analyze the impact of probability weighting on optimal insurance demand in a unified framework. We use the decreasing relative overestimation weights as a new local condition for the probability-weighting function, which is useful for comparative static analysis. We discuss the impact of probability weights on coinsurance, deductible selection, low-probability-high-impact risk versus high-probability-low-impact risk, and the need for insurance when there is non-performance risk. Depending on the question of insurance needs, probability weighting can make a better or worse difference than expected utility**.
Original link:cognitive abilities and life insurance holdings: evidence from 16 european countries
Cognitive ability and life insurance holdings: evidence from 16 European countries
Author
Chu-Shiu Li (Kaohsiung University of Science and Technology), Gene CRichard J. Lai (University of North Carolina at Charlotte), Saruultuya Tsensuren (National University of Mongolia).Butler (Department of Economics, Southwestern University of Finance and Economics, Brigham Young University), Chwen-Chi Liu (Feng Chia University).
Abstract:The aim of this study is to examine the relationship between two types of cognitive abilities (numeracy and recall) and life insurance holdings in European countries households with better numeracy and recall are more likely to own life insurance. interaction effects indicate a higher level of education decreases the positive effect of numeracy on life insurance holdings and increases the positive effect of recall on life insurance holdings. multinomial regressions indicate that recall has a positive impact on the decisions to hold term life, whole life, and both term and whole life insurance policies and a negative impact on the decision not to hold any type of life insurance policy. we also find that recall has a greater impact on the decision to own term life policies than on the decision to own whole life (both term and whole life) policies. one possible reason is whole life policies consist of many options that are difficult to comprehend even with higher cognitive abilities. one implication of this study is marketing by life insurers should take into account household cognitive abilities.
The aim of this study was to examine the relationship between two cognitive abilities (mathematical ability and memory ability) and life insurance holdings in European countries. Family members with good math skills and memory skills are more likely to have life insurance. The interaction effect showed that higher education level reduced the positive effect of mathematics ability on life insurance holdings and increased the positive effect of memory ability on life insurance holdings. Polynomial regression shows that memory capacity has a positive impact on the decision to hold term life insurance, whole life insurance, and both term and whole life insurance, and negatively affects the decision not to hold any type of life insurance. We also found that the ability to remember had a greater impact on the decision to hold a term life insurance than the decision to have a whole life insurance policy (or a term and life insurance policy together). One possible reason for this is that whole life insurance policies involve many options that can be difficult to understand, even with higher cognitive abilities. One takeaway from this study is that life insurance companies should be marketed with the cognitive abilities of family members in mind.
Original link: Table of Contents Issue 2.
empirical analyses of selection and welfare in insurance markets: a self-indulgent survey
insurance wage-offer disparities by gender: random forest regression and quantile regression evidence from the 2010–2018 american community surveys
weather extremes, agriculture and the value of weather index insurance
optimal unemployment accounts based on observable parameters
empirical analyses of selection and welfare in insurance markets: a self-indulgent survey
An Empirical Analysis of Insurance Market Choices and Benefits: A Casual Literature Review
Author
Liran Ein** Stanford University, National Bureau of Economic Research, United States of America);Amy Finkelstein (Massachusetts Institute of Technology, National Bureau of Economic Research).
Abstract:This review article surveys work that has been done using an empirical framework for analyzing selection in insurance markets developed by ein** et al. (ein** et al., quarterly journal of economics 125:877-921, 2010a). we briefly review that framework, and then describe a number of empirical applications that researchers h**e undertaken across an array of settings in both insurance and credit markets. we also discuss some of the useful extensions to the original framework that others h**e made and applied. the review is intended to be useful for scholars who may want to apply the framework in their own work on insurance, credit, or other selection markets.
This review article examines research on the use of the empirical framework proposed by Ein** et al. (Ein** et al., Quarterly Journal of Economics 125:877-921, 2010a) to analyse insurance market choices. We briefly review the framework and then describe some of the empirical applications that researchers have carried out in various settings in insurance and credit markets. We also discuss some of the useful extensions and applications that others have made to the original framework. This review is intended to assist academics who may wish to apply the framework to their work in insurance, credit, or other options markets.
Original link:insurance wage-offer disparities by gender: random forest regression and quantile regression evidence from the 2010–2018 american community surveys
Gender Differences in Pay Provision in the Insurance Industry: Evidence from Random Forest Regression and Quantile Regression Based on Community Survey Data in the United States, 2010-2018
Author
richard j.Butler (Brigham Young University);Gene Lai (University of North Carolina).
Abstract:This **examines differences in the wage-offer functions between males and females in the insurance industry the results of random forest regression (rfr) residual analysis and quantile regressions (qrs) by gender indicate considerable inequities for underwriters, sales agents, and claims adjusters. we find relatively modest wage inequities among actuaries. underwriters’ and adjusters’ gender wage inequality lies between the actuaries and sales agents. across the specifications (rfr, qr, and the ols benchmark), males benefit more from experience than females except for actuaries. in addition, males generally h**e a greater return to education than females (except for actuaries). sales agents’ jobs exhibit the greatest inequality, with extremely high values for the regression gini index of inequality at the upper quantiles. actuaries exhibit the least amount of gender inequality across the board, with demographic responses suggesting competitive pressures across states yielding the least wage-offer inequality across gender. in summary, taste-based discrimination, social employment networks, difficulties in assessing productivity in heterogeneous work situations, competitiveness in the labor market, and the flexibility of work hours help explain our findings for different occupations in the insurance industry.
This paper examines the differences in pay delivery functions between men and women in the insurance industry. The results of residual analysis and quantile regression (QRS) of random forest regression (RFR) show considerable gender inequality among underwriters, sales** and claims adjusters. We found that pay inequality among actuaries was relatively small. Gender pay inequality between underwriters and claims adjusters is between actuaries and sales**. In various models (RFR, QR, and benchmark OLS), men benefit more than women in terms of experience, with the exception of actuary. In addition, men generally have a higher return on education than women (with the exception of actuaries). The work of sales** exhibits the greatest inequality, with the Regression Gini Index of inequality having extremely high values at the upper quantile. Actuaries have the least gender inequality across the board, and demographic data show that competitive pressures between states make them the least unequal in pay delivery. In conclusion, preference-based discrimination, social employment networks, difficulties in assessing productivity in heterogeneous work environments, competition in the labor market, and flexibility in working hours help explain the findings of our research on different occupations in the insurance industry.
Original link:weather extremes, agriculture and the value of weather index insurance
The value of extreme weather, agriculture, and weather index insurance
Author
Christian Hott (Helmutschmidt University), Judith Regner (Helmut Schmidt University).
Abstract:This **evaluates the potential value of a weather index insurance for the agriculture sector in an high income country (germany). in our theoretical analysis we model an index insurance, a loss-based insurance market as well as a combination of both kinds of insurance and compare the resulting expected utility of a risk **erse crop farmer. to find a suitable index, we conduct a panel estimation and evaluate the link between different weather variables and losses of crop farmers in germany. following our estimation, mean temperatures in summer h**e the highest potential for a valuable index insurance. finally, we simulate the theoretical model using the results from the estimation and using different thresholds for the definition of a natcat. according to this simulation, index-insurance is more attractive for the lower and more frequently occurring losses and loss-based insurance is more attractive for rare high losses. a combination of both kinds of insurance could be optimal for intermediate cases.
This paper assesses the potential value of weather index insurance for the agricultural sector in a high-income country (Germany). In our theoretical analysis, we establish an index insurance market, a loss-based insurance market, and a combination of the two forms, and compare the expected utility of risk-averse crop growers. To find a suitable index, we performed panel estimates and evaluated the links between different weather variables and crop grower losses in Germany. According to our estimates, average summer temperatures are most likely to be valuable index insurance. Finally, we simulated the theoretical model using estimates and different natcat (i.e., natural catastrophes) defined thresholds. Based on the simulation results, index insurance is more attractive for lower and more frequently occurring losses, while loss-based insurance is more attractive for rare high losses. For intermediate cases, a combination of the two types of insurance may be the best option.
Original link:optimal unemployment accounts based on observable parameters
Optimal unemployment account based on observable parameters
Author
Rubén Castro (Technical University of Federico Santa María).
Abstract: Baily (1978)'s model provides an observable condition of optimality for unemployment benefits ("b").we add unemployment accounts (uas) into the model, where employed individuals deposit a “s” s**ing rate and uas finance unemployment benefits until their funds are exhausted and tax-financed benefits begin. the idea is that uas reduce the distortion caused by pooling financed benefits, but in doing so they lower consumption smoothing across states of nature. we found that baily (1978)’s rule for optimal benefits remains unchanged if uas are added into his model, and we found a **and easily observable rule for the optimal s**ing rate into uas: the proportion of unemployment to be self-financed should equal the ratio of unemployment duration elasticity with respect to s and b.
Baily's (1978) model is unemployment benefits ("b") provides an observable condition. We have added unemployment accounts (UAS) to the model, i.e. the employed person to:"s"The savings rate is deposited in that account, and the Unemployment Account (UAS) funds unemployment benefits until they run out of money and tax-funded benefits begin to be distributed. The idea is that the unemployment account (UAS) reduces the distortion caused by centralized benefits, but it also reduces the smoothness of consumption in the natural state. We found that if the unemployed account (UAS) was added to Baily's (1978) model, its optimal benefit rule would remain the same, and we also found a simple and easily observable optimal savings rate rule for the unemployed account (UAS): the unemployment self-financing ratio should be equal to the ratio of the elasticity of the duration of unemployment with respect to s and b.
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