Depositors' Welfare,Deposit Insurance,and Deregulation

We develop an analytical model to address the question of optimal deposit insurance policy and to examine the impact of deregulation on depositors' welfare and the soundness of the insurance system. We find that the optimal level of regulation depends critically on the functional relationship between risk and return. We show that in general deregulation of bank activities and/or of deposit rate ceilings will in volve tradeoff between depositors' welfare and the soundness of the insurance system. Our analysis also indicates that risk-sensitive premium and capital requirement schedules may not be efficient in managing the risk of banks.     

财产保险费率市场化的生成机制研究

我国财产保险费率市场化经历了管制——解除管制——管制三个阶段,目前,费率市场化的生成机制仍未形成。本文从财产保险定价的特殊性出发,探讨财产保险费率市场化应具备的特殊条件,以及促使上述条件得以生成的机制,并对费率市场化的两种生成机制进行比较分析,提出我国下一步费率政策改革的建议。     

Subsidization and Choice in the Group Health Insurance Market

This study investigates the effect of group health insurance plan choice on insurance unit price. The empirical findings suggest that the unit price of insurance, as measured by the ratio of the premium to expected indemnity benefits, is lower in group plans that offer employees a choice of different insurance options and require a premium contribution than it is in plans lacking at least one of these two features. The analyses suggest that lower unit prices are related to an increase in indemnity benefits and that the reduction in the unit price is greater for lower risks. The findings indicate that although subsidization of high risks by low risks occurs with group health insurance, the degree of subsidization is less when employees are offered a choice of health insurance plans.     

Deregulation,Pricing Strategies,and Claim Behavior in the Taiwan Automobile Insurance Market

Stringent pricing regulations have long been in effect in the Taiwan automobile insurance market. In April 2009, a pricing deregulation was adopted, enabling insurers to establish their own auto insurance premium rates. This study examines the effects of deregulation in terms of three hypotheses that we propose pertaining to market shares, loading factors, and last policy month claims. The quantitative analysis results show that pricing deregulation prompts insurers to lower their rates. The effects of deregulation for insurers are determined by not only the decision to deduct premiums and the deduction percentages, but also by policy type.     

Uncertainty about Government Policy and Stock Prices

We analyze how changes in government policy affect stock prices. Our general equilibrium model features uncertainty about government policy and a government whose decisions have both economic and noneconomic motives. The model makes numerous empirical predictions. Stock prices should fall at the announcement of a policy change, on average. The price decline should be large if uncertainty about government policy is large, and also if the policy change is preceded by a short or shallow economic downturn. Policy changes should increase volatilities and correlations among stocks. The jump risk premium associated with policy decisions should be positive, on average.     

Equilibrium Pricing of General Insurance Policies

Abstract

A model is developed for determining the price of general insurance policies in a competitive, noncooperative market. This model extends previous single-optimizer pricing models by supposing that each participant chooses an optimal pricing strategy. Specifically, prices are determined by finding a Nash equilibrium of an N-player differential game. In the game, a demand law describes the relationship between policy sales and premium, and each insurer aims to maximize its (expected) utility of wealth at the end of the planning horizon. Two features of the model are investigated in detail: the effect of limited total demand for policies, and the uncertainty in the calculation of the breakeven (or cost price) of an insurance policy.

It is found that if the demand for policies is unlimited, then the equilibrium pricing strategy is identical for all insurers, and it can be found analytically for particular model parameterizations. However, if the demand for policies is limited, then, for entrants to a new line of business, there are additional asymmetric Nash equilibria with insurers alternating between maximal and minimal selling. Consequently it is proposed that the actuarial cycle is a result of price competition, limited demand, and entry of new insurers into the market. If the breakeven premium is highly volatile, then the symmetric equilibrium premium loading tends to a constant, and it is suggested that this will dampen the oscillatory pricing of new entrants.     

The Effects of Macroeconomic Factors on Pricing Mortgage Insurance Contracts

Numerous empirical studies, including Abraham and Hendershott (1996) , Muellbauer and Murphy (1997) , Leung (2004) , and Oikarinen (2009) , have identified a significant relationship between housing prices and macroeconomic factors. Using a linear regression on the comovement of macroeconomic factors and housing prices, this article employs an option‐pricing framework to price and hedge the fair premia of mortgage insurance (MI). Our model provides improved performance in terms of MI premium pricing, especially during periods that are characterized by high housing prices. Ignoring the impacts of macroeconomic factors on housing prices will lead to an underestimation of MI premia.     

寿险保单贴现业务的发展与思考

保单贴现是一种投资者以折扣价买进即将到期的人寿保单,到期获得保险公司给付的保险金,同时解决了绝症患者和老年病患高额医疗费的需要,以及老年人养老费用的需要,这是一种多赢的投资工具,在国外发达国家已经存在多年,并发展越来越快;随着我国金融市场的开放和人们保险意识的加强,发达国家保单贴现业务值得我国借鉴,尽快推出这一创新的保险业务,以满足部分保单持有人提前变现保单的需求。     

Wealth, Income, and Optimal Insurance

This article considers the decision to purchase insurance against possible losses of a property or wealth. The decision involves a standard economic trade‐off between the benefit of protection against loss and the cost of insurance premium. The premium is paid out of the income and decreases the consumption of other goods and services, rather than out of wealth and decreases the property or wealth. The demand for insurance depends mainly on the income and preferences. As a result, unlike in the standard model, a fair premium is neither necessary nor sufficient for the optimality of full coverage insurance. Rather, the individuals with higher incomes purchase full coverage insurance even at unfair prices of insurance while the individuals with lower income purchase partial coverage insurance at a fair price.     

Price presentation and consumers’ choice

Currently, regulatory authorities and consumers ask for more cost transparency with respect to financial product components. In life insurance, for instance, the premium for products should be split in its components: A premium for death benefits, the savings premium, the cost of an investment guarantee, and the administration costs. In this regard, it is important for insurance companies and regulators to know to what extent the way of presenting the prices of an offer affects consumer evaluation of the product. Based on a paper by Huber et al. (How do price presentation effects influence consumer choice? The case of life insurance products. Working paper, 2011) as presented at the annual meeting of Deutscher Verein für Versicherungswissenschaft in 2011, this article presents the effects of different forms of presenting the price of life insurance contract components and especially of investment guarantees on consumer evaluation of this product. This is done by means of an experimental study using a representative panel for Switzerland and by focusing on unit-linked life insurance products. The findings reveal that, contrary to consumer products, there is no effect of price bundling and price optic on consumer evaluation and purchase intention for life insurance products. However, there is a significant moderating effect of consumer experience with insurance products on this relationship.     

Regulator performance,regulatory environment and outcomes: An examination of insurance regulator career incentives on state insurance markets

In this paper we test whether the past or future labor market choices of insurance commissioners provide incentives for regulators in states with price regulation to either favor or oppose the industry by allowing prices that differ significantly from what would otherwise be the competitive market outcome. Using biographical data on insurance regulators, economic and state specific market structure and regulatory variables, and state premium and loss data on the personal automobile insurance market, we find no evidence consumers in prior approval states paid significantly different “unit prices” for insurance than consumers in states that allow competitive market forces to determine equilibrium prices during the time period 1985–2002. We do, however, find evidence regulators who obtained the position of insurance commissioner by popular election and those who seek higher elective office following their tenure as insurance commissioner allow higher overall “unit prices” relative to competitive market states. The “unit price” of insurance in regulated states is not statistically different from the competitive market outcome for regulators that make lateral moves back into state government and it is mildly higher for regulators who enter the insurance industry following their tenure. Finally, we find some evidence regulators who describe themselves as consumer advocates are successful reducing the price of insurance in favor of consumers in regulated markets. Overall the results are consistent with the existence of asymmetric information in the regulatory process that agents use to enhance their career aspirations.     

费率市场化对车险市场影响的经济学模型分析

为了解决车险市场长期以来高回扣、高代理费的混乱局面,我国在2003年1月1日推行费率市场化,但随之而来的是,不仅各保险公司仍然采用高代理费争夺市场,而且还出现了过低费率的非理性定价以及费率的频繁调整。本文将以事实为基础,通过分析代理人的经营情况和保险公司保费收入最大化的行为模式,建立一个保险需求函数的模型,来解释费率改革如何影响车险市场,并提出了反思和建议。     

Monetary policy,doubts and asset prices

Asset prices and the equity premium might reflect doubts and pessimism. Introducing these features in an otherwise standard New-Keynesian model changes optimal policy in a substantial way. There are three main results: (i) asset-price movements improve the inflation-output trade-off so that average output can rise without much inflation costs; (ii) a “paternalistic” policymaker – maximizing the expected utility of the consumers under the true probability distribution – chooses a more accommodating policy towards productivity shocks and inflates the equity premium; (iii) a “benevolent” policymaker – maximizing the objective through which decisionmakers act in their ambiguous world – follows a policy of price stability.     

The Forward Premium in the Nord Pool Power Market

This article investigates the forward premium of futures contracts in the Nordic power market for the time period from January 2004 to December 2013. We find that futures prices are biased predictors of the subsequent spot prices and that there is a significant forward premium in the Nord Pool market, particularly during the winter and autumn. We analyze the impact from several factors on the forward premium. The spot price, and the deviation of water inflow from its usual level, positively affect the forward premium. The variance of the spot price also has a positive effect on the forward premium, but only for the contract closest to delivery.     

The Determination of Fair Profits for the Property-Liability Insurance Firm

Single period and dynamic valuation models in continuous time, under certainty and uncertainty, are developed for a property-liability insurance contract to determine the “fair” (competitive) premium and underwriting profit. The intertemporal stochastic model assumes that the claim frequency and the price index of claim settlements are functions of a set of underlying state variables which follow a multivariate Wiener process. The competitive premium is shown to be proportional to the claim frequency and the price index for claim settlements at the time the policy is issued. The factor of proportionality varies directly with the claim settlement rate and the length of coverage, and inversely with the risk-adjusted real interest rate on the dollar-valued claim rate.     

The Cost of Pension Insurance

This article estimates the cost of the federal pension insurance program. Pension insurance claims have an important market‐risk component, which means that the cost of the exposure cannot be estimated by discounting future claims by the risk‐free rate. Moreover, owing to the complexity of the insurance contract, its price cannot be estimated with known options formulas without introducing an error of nonquantifiable magnitude. To circumvent these problems, we model the insurance program in its full complexity and use a Monte Carlo method. By hedging the exposure with a dynamic premium policy that offloads the market risk to the insureds, one can calculate the risk‐free, or actuarial, cost of that policy. One can also characterize the nature of the subsidy and its structure across insured plans. Finally, we provide an estimate of the implicit cost of the hedge function that taxpayers currently are providing for zero remuneration. The model shows that simple contingent claims models of pension insurance result in a price that is about triple the true market cost of the insurance, and that pension insurance models that ignore market risk understate the cost by half. The solution demonstrates the broad characteristics that might characterize a credible private‐sector version of pension insurance.     

住房投机与政策调控对房价波动的影响——基于中国40个重点城市的数据

构建住房需求结构、政策调控和价格的动态系统模型,依据2007-2021年40个重点城市季度数据,考量政策调控对于住房投机和房价波动实施效果。结果显示：住房投机推动了房价上涨,政府住房调控政策对房价波动影响差异显著;异质性分析显示,不同地区政策调控实施效果存在差异。鉴于此,应因城施策、分类指导,同时积极畅通房地产调控政策传导机制,提高传导效率,促进房地产市场平稳健康发展。     

The Formation of Inflation Expectations: Microdata Evidence from Japan

We propose a novel approach for measuring inflation expectations, which can alleviate the rounding number problem. Furthermore, we examine how consumers form inflation expectations. We find that consumers heterogeneously update their information sets on prices; 46% of the consumers collect information about the consumer price index at least once a quarter, while the remaining consumers less frequently or never obtain this information. We also find that forecast revisions are sensitive to a change in food prices. More than half of consumers are attentive only to a change in food prices and may form their inflation expectations using food price changes as a signal of fluctuations in the overall inflation rates. The existence of consumers who are inattentive to aggregate inflation casts doubt on the transmission of monetary policy through the management of expectations.     

Spot price modeling and the valuation of electricity forward contracts: The role of demand and capacity

We propose a model where wholesale electricity prices are explained by two state variables: demand and capacity. We derive analytical expressions to price forward contracts and to calculate the forward premium. We apply our model to the PJM, England and Wales, and Nord Pool markets. Our empirical findings indicate that volatility of demand is seasonal and that the market price of demand risk is also seasonal and positive, both of which exert an upward (seasonal) pressure on the price of forward contracts. We assume that both volatility of capacity and the market price of capacity risk are constant and find that, depending on the market and period under study, it could either exert an upward or downward pressure on forward prices. In all markets we find that the forward premium exhibits a seasonal pattern. During the months of high volatility of demand, forward contracts trade at a premium. During months of low volatility of demand, forwards can either trade at a relatively small premium or, even in some cases, at a discount, i.e. they exhibit a negative forward premium.     

The price of power: The valuation of power and weather derivatives

Pricing contingent claims on power presents numerous challenges due to (1) the unique behavior of power prices, and (2) time-dependent variations in prices. We propose and implement a model in which the spot price of power is a function of two state variables: demand (load) and fuel price. In this model, any power derivative price must satisfy a PDE with boundary conditions that reflect capacity limits and the non-linear relation between load and the spot price of power. Moreover, since power is non-storable and demand is not a traded asset, the power derivative price embeds a market price of risk. Using inverse problem techniques and power forward prices from the PJM market, we solve for this market price of risk function. During 1999–2001, the upward bias in the forward price was as large as $50/MWh for some days in July. By 2005, the largest estimated upward bias had fallen to $19/MWh. These large biases are plausibly due to the extreme right skewness of power prices; this induces left skewness in the payoff to short forward positions, and a large risk premium is required to induce traders to sell power forwards. This risk premium suggests that the power market is not fully integrated with the broader financial markets.