To Hedge or Not to Hedge: Managing Demographic Risk in Life Insurance Companies

Demographic risk, i.e., the risk that life tables change in a nondeterministic way, is a serious threat to the financial stability of an insurance company having underwritten life insurance and annuity business. The inverse influence of changes in mortality laws on the market value of life insurance and annuity liabilities creates natural hedging opportunities. Within a realistically calibrated shareholder value (SHV) maximization framework, we analyze the implications of demographic risk on the optimal risk management mix (equity capital, asset allocation, and product policy) for a limited liability insurance company operating in a market with insolvency‐averse insurance buyers. Our results show that the utilization of natural hedging is optimal only if equity is scarce. Otherwise, hedging can even destroy SHV. A sensitivity analysis shows that a misspecification of demographic risk has severe consequences for both the insurer and the insured. This result highlights the importance of further research in the field of demographic risk.     

基于保险业务流程的知识管理问题——以团体健康保险新契约核保业务流程为例

保险行业是一个流程导向性的行业,也是一个高度知识密集型的行业。保险公司员工需要在某个专业领域多年的知识积累,包括流程知识、业务领域的技术、复杂问题的应急能力等经验知识,这些都是为了高效地完成工作。而这些类型的知识普遍存在于人们的大脑中,并且具有不稳定易变的特征,所以迫切地需要挖掘这类知识,并进行知识共享。保险公司的运行...     

Risiken aus kommerzieller Nutzung des Internet — Möglichkeiten der Schadenverhütung und Versicherung

Due to the increasing importance of the Internet and its commercial use a new risk category has emerged, opening up interesting business opportunities for insurance companies. — Besides insurance, loss prevention measures must be considered key aspects in this context, particularly since without contract clauses regarding loss prevention and extensive assessment of an insured’s activities in this field, insurance may not be available in many cases. After a short classification and explanation of Internet risks, this paper firstly deals with loss prevention, concentrating on the technical measures such as cryptology or firewall concepts, which are specific for the risks in question. These measures allow for a significant increase in the security of data transfer and the security of individual networks’ connections to the Internet. A complete elimination of risk, however, is usually not an economically reasonable goal. The question, to what extent the remaining risk can be covered by insurance, is addressed in the following section of this paper, in which we analyze problems of insurability and how these problems could probably be solved through product design.     

Underwriting and investment risks in the property-liability insurance industry: evidence prior to the 9–11 event

Underwriting and investment are two important and related business activities of insurance companies. However, studies on the interrelation between underwriting and investment risks of Property-Liability (P-L) insurance companies are sparse in the literature. Using a sample of US P-L insurers, this article conducts an empirical investigation of how these two risks are associated with each other in the 1994–2000 period (before the September 11th terrorist attack in 2001). Our results, robust to various estimations, suggest that there is no significant relationship between the underwriting and investment risks among our sample firms. Such results based on pre 9–11 event period provide some support for the conjecture of Achleitner et al. (Geneva Pap Risk Insur Issues Pract 27:275–282, 2002) that many insurance companies may have failed to take an integrated approach to risk management. This resulted in a heavy loss due to dual exposures in both underwriting and investment in the 9–11 event. In the aftermath of the recent global financial crisis, risk taking and risk management of financial institutions have received more attention and increasing scrutiny. We believe the current paper provides some useful insights in this vein.     

Scanning the periphery

Companies often face new rivals, technologies, regulations, and other environmental changes that seem to come out of left field. How can they see these changes sooner and capitalize on them? Such changes often begin as weak signals on what the authors call the periphery, or the blurry zone at the edge of an organization's vision. As with human peripheral vision, these signals are difficult to see and interpret but can be vital to success or survival. Unfortunately, most companies lack a systematic method for determining where on the periphery they should be looking, how to interpret the weak signals they see, and how to allocate limited scanning resources. This article provides such a method-a question-based framework for helping companies scan the periphery more efficiently and effectively. The framework divides questions into three categories: learning from the past (What have been our past blind spots? What instructive analogies do other industries offer? Who in the industry is skilled at picking up weak signals and acting on them?); evaluating the present (What important signals are we rationalizing away? What are our mavericks, outliers, complainers, and defectors telling us? What are our peripheral customers and competitors really thinking?); and envisioning the future (What future surprises could really hurt or help us? What emerging technologies could change the game? Is there an unthinkable scenario that might disrupt our business?). Answering these questions is a good first step toward anticipating problems or opportunities that may appear on the business horizon. The article concludes with a self-test that companies can use to assess their need and capability for peripheral vision.     

“The Future of Risk Classification in the Age of Predictive DNA-Based Testing”, Donald C. Chambers,January 1999

Abstract

The correlation among multiple lines of business plays an important role in quantifying the uncertainty of loss reserves for insurance portfolios. To accommodate correlation, most multivariate loss-reserving methods focus on the pairwise association between corresponding cells in multiple run-off triangles. However, such practice usually relies on the independence assumption across accident years and ignores the calendar year effects that could affect all open claims simultaneously and induce dependencies among loss triangles. To address this issue, we study a Bayesian log-normal model in the prediction of outstanding claims for dependent lines of business. In addition to the pairwise correlation, our method allows for an explicit examination of the correlation due to common calendar year effects. Further, different specifications of the calendar year trend are considered to reflect valuation actuaries’ prior knowledge of claim development. In a case study, we analyze an insurance portfolio of personal and commercial auto lines from a major U.S. property-casualty insurer. It is shown that the incorporation of calendar year effects improves model fit significantly, though it contributes substantively to the predictive variability. The availability of the realizations of predicted claims permits us to perform a retrospective test, which suggests that extra prediction uncertainty is indispensable in modern risk management practices.     

Strategic Market Entry Project

Successful risk management is critical to top level decision makers in any organization, involving fundamental strategic policy and planning to identify and allocate scarce resources to projects or activities that generate sustainable competitive advantage and maximize available long‐term growth opportunities, or even survival. This article describes a flexible group project wherein students of risk management and insurance (RMI) may gain additional exposure and experience with applications of fundamental strategic management theory in the context of their particular RMI major coursework. The Project may be a useful tool in helping RMI students further develop their research and presentation skills, as well as enhance critical strategic decision making; exposure to cultural, regional or globalization issues; application of fundamental strategic management concepts; and knowledge of current events. While this Project was developed primarily for RMI students, students across business disciplines also may benefit from participation.     

Peer-to-Peer-Absicherung privater Risiken: Eine Exploration am Beispiel von Wildschaden

This paper examines the extent to which business model development is an effective method of surmounting market failure in the insurance industry. In particular, it endeavours to demonstrate that replacing the traditional relationship between the insured and the insurer with a bilateral agreement opens up new markets, thus enabling hitherto non-insurable risks to be covered by new peer-to-peer business models. The insurance against risks caused by wild animals was chosen as the empirical field, since it is known to be an area which exhibits market failure. Based on 16 episodic interviews with representatives of the hunting community, demand structures and relevant contextual factors are revealed and analysed in terms of risk coverage and claims management among community members. This paper thus proposes an alternative position to that of the traditional insurance business, in which cover is based on a large and diversified risk group.     

Accessibility of flood risk insurance in the UK: confusion,competition and complacency

Flood risk insurance can be an effective tool in assisting the restoration of damaged property after a flood event and sustaining communities through difficult times. It can also form part of a wider flood risk management strategy. In the light of recent flood events in the UK and in the context of changing property insurance markets, the universal cover previously enjoyed by floodplain residents has been called into question. Conflicting media and industry views leave the floodplain resident and the wider community in confusion. A survey of floodplain residents in England regarding their experience with flooding and flood insurance in England has been undertaken. The results reveal that some floodplain residents do indeed encounter difficulties when seeking insurance for their homes. However, despite the risk‐averse policies of some insurers, availability of insurance is still strong in both at‐risk and previously flooded locations. Success in gaining insurance may lead to complacency among residents who see no advantage in pursuing other, more costly, damage mitigation actions. As a tool in risk management, therefore, the market is prevented from realising its potential by competition, which results in a lack of a consistent approach, rewards homeowners' search strategies and reduces information flow.     

Risk Management: The Unifying Framework for Business Scholarship and Pedagogy

In this article, I provide a brief critical assessment of the intellectual history of risk management and insurance (RMI) as an academic discipline. Although the level of rigor and overall quality of RMI scholarship and pedagogy continue to improve, RMI remains too narrowly focused upon risk management issues specifically affecting insurance markets and institutions. Since risk management is of fundamental importance to virtually all areas of business scholarship and pedagogy, we must seek ways to more broadly apply risk management concepts.     

Die Risikoübernahme von Versicherungsunternehmen: Eine empirische Analyse für Deutschland und Großbritannien

In this paper we analyze the risk resulting from an insurer’s investment policy. For this a hypothetical asset return rate is defined, based on which the German and British insurance market is analyzed. The study design allows an investigation of the investment risk in different countries or for different lines of business. The aim of the analysis is to detect general market trends in the investment policy and an analysis of effects of important changes over time on the investment risk of insurers. The questions analyzed in this paper are also of particular relevance beyond the background of current reform proposal for insurance regulation in Europe in the field of risk management and capital adequacy (Solvency II).     

中国保险集团控股公司综合金融风险甄别——以平安保险集团为例

使用Shapley值分解法评估平安集团五家控股子公司系统重要性,分析平安集团内部金融风险结构特征.结果显示:平安集团风险集中度较高;规模对控股子公司重要性有较大影响;平安集团风险主要来自于银行业务、寿险业务和信托业务.保险集团强化风险管理应注重系统重要性控股子公司识别与风险管控,注意保险集团内部各类业务间交叉金融风险识别与防范,健全完善集团内部风险管理控制系统.监管部门应构建综合金融监管部门,加强保险集团监管.     

财产保险公司资产负债管理多维量化评估体系研究

良好的资产负债管理是保险业可持续发展的基石,也是支持保险业在日益复杂的风险环境中保持稳健发展、防范系统性风险的重要保障。近年来,随着我国金融市场发展,业务产品创新加快,保险业在资产端与负债端的业务结构和风险特征出现了新情况、新变化。特别是部分保险公司缺乏有效的治理结构,采取激进经营、激进投资的策略,导致业务快进快出、风险敞口过大以及流动性问题,对保险公司资产负债匹配管理、风险控制提出了挑战。本文介绍了财产保险公司资产负债多维度量化评估规则设计原理、主要评估模型和评估方法,针对财产保险公司的负债特性提出的沉淀资金匹配,在成本收益匹配中有机地将资产投资收益与承保业务综合成本进行匹配,在现金流匹配模式中打破了僵化的匹配模式,解决了长期困扰财产保险公司的资产负债期限不匹配的问题,对财产保险公司资产负债管理具有重要意义。     

Modeling Operational Risk With Bayesian Networks

Bayesian networks is an emerging tool for a wide range of risk management applications, one of which is the modeling of operational risk. This comes at a time when changes in the supervision of financial institutions have resulted in increased scrutiny on the risk management of banks and insurance companies, thus giving the industry an impetus to measure and manage operational risk. The more established methods for risk quantification are linear models such as time series models, econometric models, empirical actuarial models, and extreme value theory. Due to data limitations and complex interaction between operational risk variables, various nonlinear methods have been proposed, one of which is the focus of this article: Bayesian networks. Using an idealized example of a fictitious on line business, we construct a Bayesian network that models various risk factors and their combination into an overall loss distribution. Using this model, we show how established Bayesian network methodology can be applied to: (1) form posterior marginal distributions of variables based on evidence, (2) simulate scenarios, (3) update the parameters of the model using data, and (4) quantify in real‐time how well the model predictions compare to actual data. A specific example of Bayesian networks application to operational risk in an insurance setting is then suggested.     

论机动车保险中高风险车辆的风险管理

高风险车辆赔付率的高低对机动车保险业务的经营效益有极大的影响,是保险公司风险管理的重点。按照风险管理的基本原理,保险公司应从风险规避、风险转移和风险控制三个方面着手,采取适当措施,加强对高风险车辆的风险管理,降低赔付率,保证业务的稳定性。不仅如此,由于风险具有可变性,实施风险管理不能一成不变,必须根据风险变化的情形随时加以调整和修改,按照科学的程序进行。     

我国保险产品结构的合理性分析

近年来,我国保险市场存在着产品结构不合理的现实问题,虽然强调"转方式、调结构",但主要是针对寿险业务结构的调整,并未注意到寿险业务与非寿险业务比例结构的合理性,财产保险市场发展薄弱.本文首先从产品保障功能的角度对产品结构合理性的衡量问题进行了讨论,引入了"非寿险业务占比"指标作为衡量保险业发展健康程度的指标.通过对国际...     

我国巨灾风险管理模式的设计及其运作

商业化、事前补偿的巨灾保险是巨灾风险管理发展的趋势。我国应该逐步构建以政府为主导,涵盖政府、保险公司、再保险公司、资本市场和潜在受灾者五个主体的巨灾风险管理模式。在实际运作中,要考虑巨灾保险承保、保险公司巨灾风险转移和区分潜在客户等。     

无锡新区:跨国公司业务代表谈如何面对WTO

不久前,在无锡新区国际咨询顾问委员会召开的第三届年会上,不少委员(这些委员大都是已在无锡新区投资的跨国公司亚太区或中国区的高级行政管理人员和长期以来始终关注无锡新区发展的国外跨国公司和投资咨询机构的高级管理人员等)就中国加入WTO与无锡新区跨世纪发展等重大问题进行了广泛、深入地讨论与论证。这些意见可供有关部门参考。本刊择其部分发言摘要刊发于后,以飨读者。