Volume 12, Issue 2 -

In this paper, we explore the optimal price, default ratio, and capital for insurance companies under social welfare maximization from regulators' perspective. From comparisons of cases under symmetric and asymmetric information in the insurance market, we find that an optimal regulatory objective should be set to maximize social benefit and induce fair benefit distribution in a transparent insurance market, and direct regulation on capital constraint can increase insurance demand and shareholders' benefits in a non-transparent market.

Using a sample of 5,752 Taiwanese firm-year observations over the 2008 to 2012 period, we examine whether and how the existence of D&O insurance may affect firm performance. Our results suggest that whether to purchase D&O insurance is an endogenous corporate behavior, D&O insurance is not significantly related to firm performance. In addition, we find that firms with higher cash ratio, larger and more independent board are more likely to purchase the D&O insurance, while older firms are less likely to buy the D&O insurance. Our study implies that the government should not require firms to buy the D&O insurance. Instead, government should allow firms themselves to decide whether they optimally should purchase D&O insurance or not based on each firm’s particular circumstances. Firms should also not just simply follow their peers to buy the D&O insurance. They should carefully compare the benefits and costs of the D&O insurance based on their own situations, and only buy the insurance when the benefits exceed the costs.

In this paper, a general framework is built up to model the dynamic of consumer health plan choice and individual health insurance market competition. A primary goal is to identify driving forces to individual health insurance equilibrium market coverage and premium. In the baseline model, we introduce plan quality information search cost as an additional determinant to consumer’s plan choice. Health insurers compete under the Hotelling’s game theory framework. Equilibrium solutions of the baseline model highlight the importance of budget limit and information search cost to health plan enrollment. The more important objective is to examine the impact of market entrants on equilibrium insurance market coverage and plan prices. In the model with market entry, we add an additional dimension to the baseline model. Equilibrium solutions and numerical studies show positive impact of higher insurance market coverage and lower health plan prices. The Affordable Care Act (ACA) brought multiple unprecedented changes to the health insurance market and provided opportunities to study market dynamics and driving forces. The ACA health insurance exchange market experience shows consistency with our model findings even at the early stage of implementation. More importantly, market observations suggest that entry barriers of claim costs and information search cost are high for entrants.

This article introduces a k-Inflated Negative Binomial mixture distribution/regression model as a more flexible alternative to zero-inflated Poisson distribution/regression model. An EM algorithm has been employed to estimate the model’s parameters. Then, such new model along with a Pareto mixture model have employed to design an optimal rate–making system. Namely, this article employs number/size of reported claims of Iranian third party insurance dataset. Then, it employs the k-Inflated Negative Binomial mixture distribution/regression model as well as other well developed counting models along with a Pareto mixture model to model frequency/severity of reported claims in Iranian third party insurance dataset. Such numerical illustration shows that: ( 1 ) the k-Inflated Negative Binomial mixture models provide more fair rate/pure premiums for policyholders under a rate–making system; and ( 2 ) in the situation that number of reported claims uniformly distributed in past experience of a policyholder (for instance k1=1$k_1=1$ and k2=1$k_2=1$ instead of k1=0$k_1=0$ and k2=2$k_2=2$). The rate/pure premium under the k-Inflated Negative Binomial mixture models are more appealing and acceptable.

Launched in 2012, the Principles for Sustainable Insurance serve as a global framework for the insurance industry to address environmental, social, and governance risks and opportunities. This report presents the findings of an exploratory study looking at the influence of environmental, social, and governance (ESG) risks on surety underwriting. Our findings come from a global survey of the insurance industry that sought to understand whether and how insurance and reinsurance companies are integrating ESG risks into the surety underwriting of infrastructure projects.

Export credit insurance plays an important role in promoting exportation, and thus it represents a guarantee of payment receivable for exporter. It not only offers a good way to disperse and release risk caused by uncertainty of foreign countries and importers’ credit, but also inspires a good finance support for exporter. Export corporations can apply loan from banks easily with the guarantee of export credit insurance. Characterized with lower threshold, export credit insurance finance(ECIF) becomes a good funding choice especially for small and medium companies and brings considerable intermediate businesses to commercial banks. Despite the benefits of ECIF, false trades appear frequently due to the intricate risks that are hard to be measured by quantitative method. The risks covered by export credit insurance include commercial risk and political risk. Commercial risks can be classified by two reasons: importer bankruptcy and importer collusion with exporter. The risk of insolvency can be measured by modern credit risk models, however, the probability that importer breaches a contract due to dishonesty is hard to be discerned because of information asymmetry and high cost of investigation. In ECIF, the risk is even harder to be measured as risks form both importer and exporter are involved. Game theory is widely used in adverse selection and moral hazard. The application of game theory inspired a microeconomic way of risk analysis in ECIF. The case of ECIF can be a seen as a game among the export enterprise, importer, insurer and bank. This paper will figure out the utility of each party under certain default situation and analyze each risk factor. We adopt joint game approach and tree model to obtain the equilibrium result. The purpose is to maximize the expected utility of each party and minimize the probability of exporter and importer’s collusion as they are the core reasons for the loss of commercial bank and export credit agency (ECA). Since the export credit insurance industry and related risk research are still in the early stage in China, we hope this study can enlighten a new way of risk analysis on ECIF.