Political Risk and Foreigners' Trading: Evidence from an Emerging Stock Market

This paper analyzes the impact of political risk on foreign investors' trading in emerging stock markets, market-wide and for industry portfolios, using quantified political risk ratings reported in the International Country Risk Guide and foreign flows data compiled by the Istanbul Stock Exchange. We also track the differential effect of political risk upgrades and downgrades. Political risk is shown to affect stock returns, net foreign flows, and macroeconomic variables. Foreigners' reaction to upgrades (downgrades) is slow (immediate) and smaller in magnitude. Foreigners' reaction to political risk varies with industry's sensitivity to market risk, except for the tourism sector, where their response is particularly salient. Local investors appear to provide liquidity to foreigners, who respond to information.     

The Political Economy of Volatility Dynamics in the Hong Kong Stock Market

Despite its obvious importance, little empirical research has examined the impact of political risk on stock market volatility. This paper uses data on the Hong Kong stock market over a long sample period to investigate whether political risk has induced regime shifts in stock market volatility. Regime shifts are modelled via a Markov switching EGARCH model that allows for regime-dependent volatility asymmetry. We find strong evidence of regime shifts in conditional volatility as well as significant volatility asymmetry in high volatility periods. Major political uncertainties were reflected in a switch to the high-volatility regime. However, contrary to popular perceptions, we find no evidence that the Hong Kong stock market has become persistently more volatile since the start of Sino-British political negotiations in 1982.     

The new political importance of the old hurricane risk: a contextual approach to understanding contemporary struggles with hurricane risk and insurance

In the United States, policy-makers struggle to resolve conflict between public demands for affordable insurance costs covering hurricanes and market demands for risk-based insurance pricing. Given the socially constructed nature of risk, a risk-based pricing approach prioritizes insurer values and business practices over all societal value goals expressly limiting democratic inclusion in decision-making about risk. As a step towards the more democratically inclusive approach of risk governance, this article uses the state of Florida as a case study to provide a narrative of the social and political context for the evolution of the idea of U.S. hurricane risk. I argue that today’s hurricane risk is a product of long-standing shared efforts to build prosperity. However, it is no longer a simple risk for society to overcome on its way to economic well-being. Contemporary hurricane risk is systemic and serves as a nexus for political battles over American values.     

The interplay between risk adjustment and risk rating in voluntary health insurance

Many regulated health insurance markets include risk adjustment (aka risk equalization) to mitigate selection incentives for insurers. Empirical studies on the design and evaluation of risk-adjustment algorithms typically focus on mandatory health insurance schemes. This paper considers risk adjustment in the context of voluntary health insurance, as found in Chile, Ireland, and Australia. In addition to the challenge of mitigating selection by insurers, regulators of these voluntary schemes have to deal with selection by consumers in and out of the market. A strategy for mitigating selection by consumers is to apply some form of risk rating. Our paper shows how risk adjustment and risk rating interact: (1) risk rating reduces the need for risk adjustment and (2) risk adjustment reduces premium variation across rating factors, thereby increasing incentives for consumers to select in and out of the market.     

Are female CEOs associated with lower insolvency risk? Evidence from the US property-casualty insurance industry

This paper investigates the relationship between female CEOs and insolvency risk of US property-casualty insurance companies. We show that female CEOs are associated with lower insurer insolvency propensity, higher z-score, and lower standard deviation of return on assets. These findings are robust to alternative econometric specifications to address potential endogeneity concerns and self-selection issues, including propensity score matching, the instrumental variable approach, and the difference-in-difference approach. Furthermore, we find that the impact of female CEOs on insurer insolvency risk is moderated by firm capitalization, the presence of female directors, and political conservatism of insurers' home states.     

Rare disaster risk and the expected equity risk premium

Consistent with the predictions of rare disaster models, we find that a proxy for the time‐varying probability of rare disasters helps to explain fluctuations in expectations of the equity risk premium. Our proxy for disaster risk is a recently developed measure of global political instability, and the expected market risk premium is from Value Line analysts' expected stock returns. Consistent with long‐run risk models, uncertainty about expected GDP growth and expected consumption growth is also significantly positively related to the expected market risk premium. We obtain similar results when we use the earnings–price ratio and the dividend–price ratio as proxies for the expected market risk premium.     

Public Versus Private Insurance with Dual Theory: A Political Economy Argument

This paper analyzes the political support for public insurance in the presence of a private insurance alternative. The public insurance is compulsory and offers a uniform insurance policy. The private insurance is voluntary and can offer different insurance policies. Adopting Yaari's [Econometrica, 55, 95–115, 1987] dual theory to expected utility (i.e., risk aversion without diminishing marginal utility of income), we show that adverse selection on the private insurance market may lead a majority of individuals to prefer public insurance over private insurance, even if the median risk is below the average risk (so that the median actually subsidizes high-risk individuals). We also show that risk aversion makes public insurance more attractive and that the dual theory is less favourable to a mixed insurance system than the expected utility framework. Lastly, we demonstrate how the use of genetic tests may threaten the political viability of public insurance.     

Insurance demand in the presence of loss-dependent background risk

We analyze insurance demand when insurable losses come with an uninsurable zero-mean background risk that increases in the loss size. If the individual is risk vulnerable, loss-dependent background risk triggers a precautionary insurance motive and increases optimal insurance demand. Prudence alone is sufficient for insurance demand to increase in two cases: the case of fair insurance and the case where the smallest possible loss exceeds a certain threshold value (referred to as the large loss case). We derive conditions under which insurance demand increases or decreases in initial wealth. In the large loss case, prudence determines whether changes in the background risk lead to more insurance demand. We generalize this result to arbitrary loss distributions and find conditions based on decreasing third-degree Ross risk aversion, Arrow–Pratt risk aversion, and Arrow–Pratt temperance.     

社会养老保险“多轨制”与家庭股票市场参与

依据中国家庭金融调查数据,运用Probit模型和Tobit模型,考量社会养老保险“多轨制”对家庭股票市场参与的影响。结果显示：社会养老保险“多轨制”通过缓解收入风险、健康风险与风险厌恶程度等,影响家庭股票市场参与;家庭净资产水平和信任水平异质性,影响家庭股票市场参与差异。其中,参加企职保或机关事业单位养老保险促进家庭股票市场参与显著,参加城乡居保影响不显著。鉴于此,应进一步整合社会养老保险“多轨制”,提高城乡居保的养老保障水平,充分发挥社会养老保险对家庭股票市场参与的促进作用。     

Designing feasible and effective health plan payments in countries with data availability constraints

Risk equalization schemes, which transfer money to/from insurers that have above/below average risks, are a fundamental tool in regulated health insurance markets in many countries. Risk sharing (the transfer of some responsibility for costs from a plan to the regulator or the overall insurance market), are an additional method of insulating insurers who attract higher-than-average risks. This paper proposes, implements and quantifies incorporating risk sharing within a risk equalization scheme that can be applied in a data-poor context. Using Chile's private health insurance market as case study, we show that modest amount of risk sharing greatly improves fit even in simple demographic-based risk equalization. Expanding the model's formula to include morbidity-based adjustors and risk sharing redirects compensations at insurer level and reduces opportunity to engage in profitable risk selection at the group level. Our emphasis on feasibility may make alternatives proposed attractive to countries facing data-availability constraints.     

完全信息状态下保险市场主体间的静态博弈研究

保险市场主体的行为以及他们之间的复杂关系直接影响着保险市场的发展,特别是投保人的逆向选择、道德风险和保险代理人的违规操作广泛存在,长期困扰着保险界。本文针对投保人和保险代理人的问题行为,通过建立完全信息静态博弈模型,来深入研究保险人与投保人、保险代理人之间的博弈关系,探讨解决问题的现实对策。     

Political risk forecasting

There is a lull permeating the political risk industry after an initial surge of interest in the late 1970s. This article explores the business world's possible scepticism with the concepts, theories and methods of political risk analysis, examines the relative strengths and weaknesses of approaches to political risk forecasting, and suggests ways in which companies can themselves take control of the risk assessment process. It is concluded that no single method is satisfactory, and that data from both subjective and objective sources need to be integrated for political risk assessment to become more effective.     

Risk perception and risk management in the Middle East market: theory and practice of multinational enterprises in Saudi Arabia

This exploratory study investigates the risk perception and risk management strategies of Western multinational enterprises in the Middle East. A sample of 49 German companies operating in Saudi Arabia provides the empirical setting for this research. The study reveals that cultural risk is assessed as more important in the business environment than political, financial, and economic risk. The most critical risk factors are not sufficiently included in the methodology of country risk measures, which are often used as a source for country‐specific risk information. In terms of risk management strategies, participating firms use mostly informal approaches rather than structured hedging or insurance products. Furthermore, we find that firm size has implications on the perception of some risk factors and for the level of risk management sophistication.     

风险分类对保险市场效率的影响分析

本文将社会福利作为衡量保险市场效率的标准,分析保险人的风险分类行为是否有助于信息不对称保险市场效率的提高.本文首先证明了信息不对称保险市场存在市场失灵,然后比较了实施风险分类前后社会福利的差异.结论表明:当保险市场处于R-S均衡时,准确性较高的分类能使社会福利得到改进,准确性不高的分类不能使社会福利得到改进;当保险市场...     

VaR模型及其在寿险公司风险管理中的应用

随着保险产品的创新、竞争的加剧及金融市场的发展,我国寿险公司面临的风险将更为复杂和多样,如何对这些风险进行有效管理是寿险公司面临的重要难题,而VaR模型作为当前国际金融风险管理和金融监管的主流方法,含有丰富的风险管理思想,故对VaR模型进行研究并探讨其在我国寿险公司风险管理中的应用具有一定的现实意义。本文分析了寿险公司应用VaR模型时需注意的问题,并指出我国寿险公司建立基于VaR的风险管理体系需在公司治理结构、风险管理组织架构、风险管理技术、风险数据库等方面加以完善。     

Insurance demand and country risks: A nonlinear panel data analysis

This paper investigates the impact of country risks, including political, financial, and economic risks, on the income elasticity of insurance demand. Using the panel smooth transition regression model, we find that there is a significant regime-switching effect concerning the impact of country risks on the income elasticity of insurance demand. A full-sample analysis shows that the income elasticity of insurance demand decreases when country risks diminish. In a subsample analysis based on income level, legal origin, and restriction on banks' participation in insurance activities, we find that the elasticity diminishes in general when economic risk drops. When political risk is lower, the elasticity decreases in countries with high-income, common law origin, and insurance activities permitted by banks, whereas a clear pattern cannot be identified in the case of financial risk.     

国内外车险道德风险文献综述

由于车险市场中的信息不对称，道德风险对车险经营构成了重大威胁。因此，车险道德风险已成为国内外学者研究的热点问题。本文在对车险道德风险的内涵、风险因素、博弈分析、风险防范等进行详细综述的基础上，探讨了研究中存在的不足及未来的研究趋势。     

从保险消费观视角分析我国保险业的发展

对正确保险消费观的研究,不仅对我国保险消费者的消费行为具有重要的指导意义,而且对于完善我国保险市场,实现我国保险业的科学发展亦有十分重要的作用。正确保险消费观,是以风险转移为先,以购买经济保障为本,以互助共济为己任,以最大诚信为最高准则,以保险作为生存必须品,以可持续消费为目标的保险消费理念体系。保险保障形式是整个保障体系中最普遍、最经常、最基础和最重要的防灾救灾形式,它和社会保障共同处于整个防灾救灾体系的基础地位。     

On the exposure of insurance companies to sovereign risk—Portfolio investments and market forces

A sovereign debt crisis can have significant knock-on effects in the financial markets and put financial stability at risk. This paper focuses on the transmission of sovereign risk to insurance companies as some of the largest institutional investors in the sovereign bond market. We use a firm level panel dataset that covers large insurance companies, banks and non-financial firms from nine countries over the time period from 1 January 2008–1 May 2013. We find significant and robust transmission effects from sovereign risk to domestic insurers. The impact on insurers is not significantly different from that on banks but larger than for non-financial firms. We find that systemically important insurers are more closely linked to the domestic sovereign. Based on European data, we show that risks in sovereign bond portfolios are an important driver of insurer risk, which is not reflected in current insurance regulation (incl. Solvency II in Europe).     

Ex Post Moral Hazard and Bayesian Learning in Insurance

We study a dynamic insurance market with asymmetric information and ex post moral hazard. In our model, the insurance buyer's risk type is unknown to the insurer; moreover, the buyer has the option of not reporting losses. The insurer sets premia according to the buyer's experience rating, computed via Bayesian estimation based on buyer's history of reported claims. Accordingly, the buyer has strategic incentive to withhold information about losses. We construct an insurance market information equilibrium model and show that a variety of reporting strategies are possible. The results are illustrated with explicit computations in a two‐period risk‐neutral case study.