Aspekte internationaler Durchdringung des Seeversicherungsgeschäftes im 20. Jahrhundert

The business of marine insurance is characteristically international in scope, with many transactions across national borders, and it is only lightly regulated in a free market. Apparently there is no need to cast doubt on the general importance of foreign business, neither for single competitors in this branch nor for the world-wide market of marine insurance as a whole. Keeping a closer focus on recent history of individual marine insurance markets reveals that selected countries will show an individual character referring to international competition: host market characteristics affect the international marine insurers participation in foreign markets in different ways.     

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.     

State regulation and the structure,conduct, efficiency and performance of US auto insurers

This research investigates the impact of regulation on state automobile insurance markets while controlling for other state insurance market characteristics that may be related to performance. Data for a large sample of insurers are analyzed. The results suggest that insurers in competitive and non-stringently regulated states may benefit from market power by charging higher unit prices, however insurers in these states are on average more cost X-efficient and cost X-efficient insurers charge lower prices and earn smaller profits. The empirical results also suggest that insurers in some rate regulated states are less revenue and cost-scale efficient than in competitive states.     

Deposit Insurance,Banking Crises,and Market Discipline: Evidence from a Natural Experiment on Deposit Flows and Rates

Using evidence from Russia, we carry out what we believe to be the literature's cleanest test of the direct impact of deposit insurance on market discipline and study the combined effect of a banking crisis and deposit insurance on market discipline. We employ a difference‐in‐difference estimator to isolate the change in the behavior of a newly insured group (i.e., households) relative to an uninsured “control” group (i.e., firms). The sensitivity of households to bank capitalization diminishes markedly after the introduction of deposit insurance. The traditional wake‐up call effect of a crisis is muted by this numbing effect of deposit insurance.     

Price Regulation in Secondary Insurance Markets

Secondary life insurance markets are growing rapidly. From nearly no transactions in 1980, a wide variety of similar products in this market has developed, including viatical settlements, accelerated death benefits, and life settlements and as the population ages, these markets will become increasingly popular. Eight state governments, in a bid to guarantee sellers a “fair” price, have passed regulations setting a price floor on secondary life insurance market transactions, and more are considering doing the same. Using data from a unique random sample of HIV+ patients, we estimate welfare losses from transactions prevented by binding price floors in the viatical settlements market (an important segment of the secondary life insurance market). We find that price floors bind on HIV patients with greater than 4 years of life expectancy. Furthermore, HIV patients from states with price floors are significantly less likely to viaticate than similarly healthy HIV patients from other states. If price floors were adopted nationwide, they would rule out transactions worth $119 million per year. We find that the magnitude of welfare loss from these blocked transactions would be highest for consumers who are relatively poor, have weak bequest motives, and have a high rate of time preference.     

Winner-Loser Reversals in National Stock Market Indices: Can They be Explained?

This article examines possible explanations for “winner-loser reversals” in the national stock market indices of 16 countries. There is no evidence that loser countries are riskier than winner countries either in terms of standard deviations, covariance with the world market or other risk factors, or performance in adverse economic states of the world. While there is evidence that small markets are subject to larger reversals than large markets, perhaps due to some form of market imperfection, the reversals are not only a small-market phenomenon. The apparent anomaly of winner-loser reversals in national market indices therefore remains unresolved.     

Die Marktabgrenzung im Versicherungskartellrecht am Beispiel der Berufshaftpflichtversicherungen

The definition of the relevant market is crucial to the application of European and German competition law and especially difficult when dealing with insurance markets. Generally, the product and geographic market comprises all products or services that are regarded as substitutable by consumers. In addition, the supply-side substitutability can be taken into consideration. In defining insurance product markets, the supply-side substitutability is decisive, because insurance products are seldom interchangeable from a policy holder’s point of view. Applying the concept of supply-side substitutability to professional indemnity insurances leads to product markets correlating with the different professional groups: Indemnity insurances for physicians constitute a product market; insurances for lawyers, notary publics, tax advisers and public accountants form another market and insurances for architects and construction engineers another one. These product markets are still national markets. Professional indemnity insurances are extensively shaped by the differing legal systems, namely by national insurance contract law, by liability provisions and by a legal obligation to insure. Consequently, policy holders cannot substitute their indemnity insurance with foreign insurance products and insurers are confronted with market entry barriers. However, the proposed directive on services on the internal market and the adopted directive on insurance mediation could result in community-wide markets in the near future.     

Pricing Critical Illness Insurance from Prevalence Rates: Gompertz versus Weibull

The pricing of critical illness insurance requires specific and detailed insurance data on healthy and ill lives. However, where the critical illness insurance market is small or national commercial insurance data needed for premium estimates are unavailable, national health statistics can be a viable starting point for insurance ratemaking purposes, even if such statistics cover the general population, are aggregate, and are reported at irregular intervals. To develop a critical illness insurance pricing model structured on a multiple state continuous and time-inhomogeneous Markov chain and based on national statistics, we do three things: First, assuming that the mortality intensity of healthy and ill lives is modeled by two parametrically different Weibull hazard functions, we provide closed formulas for transition probabilities involved in the multiple state model we propose. Second, we use a dataset that allows us to assess the accuracy of our multiple state model as a good estimator of incidence rates under the Weibull assumption applied to mortality rates. Third, the Weibull results are compared to corresponding results obtained by substituting two parametrically different Gompertz models for the Weibull models of mortality rates, as proposed previously. This enables us to assess which of the two parametric models is the superior tool for accurately calculating the multiple state model transition probabilities and assessing the comparative efficiency of Weibull and Gompertz as methods for pricing critical illness insurance.     

Spillover effects of increased health insurance enrollment on workers’ compensation insurance

The Patient Protection and Affordable Care Act (ACA) was designed to increase the accessibility and affordability of health insurance. While the ACA did not contain direct provisions related to workers’ compensation (WC), because health‐related coverage is a significant portion of WC costs, the ACA could have unintentionally impacted the WC market. Specifically, expanded health insurance enrollment could reduce WC losses and result in higher performance among insurers participating in the WC market. Using insurer‐state level data, we consider the impact of increased health insurance enrollment on the performance of property‐casualty (PC) insurers. Utilizing multiple measures of performance, we find that the post‐ACA period is generally associated with greater profitability for PC insurers operating in the WC market, a positive unintended consequence of this federal regulation.     

Competition leverage: how the demand side affects optimal risk adjustment

We study optimal risk adjustment in imperfectly competitive health insurance markets when high‐risk consumers are less likely to switch insurer than low‐risk consumers. Insurers then have an incentive to select even if risk adjustment perfectly corrects for cost differences. To achieve first best, risk adjustment should overcompensate insurers for serving high‐risk agents. Second, we identify a trade‐off between efficiency and consumer welfare. Reducing the difference in risk adjustment subsidies increases consumer welfare by leveraging competition from the elastic low‐risk market to the less elastic high‐risk market. Third, mandatory pooling can increase consumer surplus further, at the cost of efficiency.     

Performance of the Life Insurance Industry Under Pressure: Efficiency,Competition, and Consolidation

This article investigates efficiency and competition in the Dutch life insurance market by estimating unused scale economies and measuring efficiency‐market share dynamics during 1995–2010. Large unused scale economies exist for small‐ and medium‐sized life insurers, indicating that further consolidation would reduce costs. Over time average scale economies decrease but substantial differences between small and large insurers remain. A direct measure of competition confirms that competitive pressure is lower than in other markets. We do not observe any impact of increased competition from banks, the so‐called investment policy crisis or the credit crisis, apart from lower returns in 2008.     

The effect of predation risk on cash holdings: Empirical evidence from the U.S. property‐liability insurance industry

Corporate cash holdings play a significant role in the U.S. property‐liability insurance industry yet the topic of insurer cash holdings policy has largely been overlooked by prior empirical research. While a number of studies have investigated firm‐specific factors related to cash holdings in the insurance industry, prior research has not examined how market concentration and potential predation risk impact cash holdings. We propose a new measure of market concentration and provide evidence in support of the predation risk theory. Specifically, we show that insurers exposed to more concentrated markets tend to hold more cash. Furthermore, the relation between market concentration and cash holdings is influenced by access to internal capital. While unaffiliated insurers without access to internal capital hold greater levels of cash in more concentrated markets, group insurers with access to internal capital do not hold greater levels of cash to mitigate predation risk.     

The Perfect Storm: Hurricanes, Insurance, and Regulation

The intense hurricane seasons of 2004 and 2005 caused considerable instability in property insurance markets in coastal states with the greatest problems occurring in Florida and the Southeast. Insurers have substantially raised rates and decreased their exposures. While no severe hurricanes struck the United States in 2006 and 2007, market pressures remain strong given the high risk still facing coastal states. These developments generate considerable concern and controversy among various stakeholder groups. Government responses have varied. In Florida, political pressures prompted a wave of legislation and regulations to expand government underwriting and subsidization of hurricane risk and constrain insurers' rates and market adjustments. Other states' actions seem more moderate. In this context, it is important to understand how property insurance markets have been changing and governments have been responding to increased catastrophe risk. This article examines important market developments and evaluates associated government policies. We comment on how regulation is affecting the equilibration of insurance markets and offer opinions on policies that are helpful and harmful.     

Is Historical Cost Accounting a Panacea? Market Stress,Incentive Distortions,and Gains Trading

Accounting rules, through their interactions with capital regulations, affect financial institutions’ trading behavior. The insurance industry provides a laboratory to explore these interactions: life insurers have greater flexibility than property and casualty insurers to hold speculative‐grade assets at historical cost, and the degree to which life insurers recognize market values differs across U.S. states. During the financial crisis, insurers facing a lesser degree of market value recognition are less likely to sell downgraded asset‐backed securities. To improve their capital positions, these insurers disproportionately resort to gains trading, selectively selling otherwise unrelated bonds with high unrealized gains, transmitting shocks across markets.     

Securitization,competition and monitoring

We analyze the impact of loan securitization on competition in the loan market. Using a dynamic loan market competition model where borrowers face both exogenous and endogenous costs to switch between banks, we uncover a competition softening effect of securitization that allows banks to extract rents in the primary loan market. By reducing monitoring incentives, securitization mitigates winner’s curse effects in future stages of competition thereby decreasing ex ante competition for initial market share. Due to this competition softening effect, securitization can adversely affect loan market efficiency while leading to higher equilibrium profits for banks. This effect is driven by primary loan market competition, not by the exploitation of informational asymmetries in the secondary market for loans. We also argue that banks can use securitization as a strategic response to an increase in competition, as a tool to signal a reduction in monitoring intensity for the sole purpose of softening ex ante competition. Our result suggests that securitization reforms focusing exclusively on informational asymmetries in markets for securitized products may overlook competitive conditions in the primary market.     

Product Ratings as a Market Reaction to Deregulation: Evidence From the German Insurance Market

This study provides the first investigation of information markets as a reaction to deregulation of product forms in insurance markets. The article studies the case of Germany, where insurance product ratings entered the market after relaxation of product regulation in 1994. The ratings’ potential for enhancing the performance of a deregulated insurance market is analyzed by considering both market structure and governance characteristics of the rating market, since the theoretical literature predicts that both are important determinants of rating outcomes. Data from a unique panel data set containing disability insurance ratings from the three major rating agencies are also examined in light of theoretical predictions. Results suggest that market governance and competition characteristics are favorable for the production of unbiased and informative ratings. Ratings for disability insurance support this interpretation, since the characteristics of the ratings conform to theoretical predictions about ratings in well‐functioning rating markets.     

Solvency, Capital Allocation, and Fair Rate of Return in Insurance

In this article, we consider the links between solvency, capital allocation, and fair rate of return in insurance. A method to allocate capital in insurance to lines of business is developed based on an economic definition of solvency and the market value of the insurer balance sheet. Solvency, and its financial impact, is determined by the value of the insolvency exchange option. The allocation of capital is determined using a complete markets’ arbitrage‐free model and, as a result, has desirable properties, such as the allocated capital “adds up” and is consistent with the economic value of the balance sheet assets and liabilities. A single‐period discrete‐state model example is used to illustrate the results. The impact of adding lines of business is briefly considered.     

Regulate one service,tame the entire market: Credit cards in Turkey

In credit card markets banks provide both payment and credit services. Two regulations were recently enacted in the Turkish credit card market: one on payment services in 2005 and the other on credit services in 2006. By employing the well-known  and  method and a unique quarterly data set for 21 Turkish banks between 2002 and 2008, we investigate the extent of banks’ market power in the Turkish credit card market before and after the regulations. Unlike most of the existing literature, which considers competition and regulation for either credit or payment services and ignores the externalities between them, we consider the entire market by taking both services into account. Fixed effects estimations reveal that banks enjoyed collusive oligopoly power before the regulations. Although the first regulation did not have much impact, the second led to rises in both banks’ total revenues and competition in the entire market.     

Sozial- und wettbewerbsrechtliche Konflikte bei der Fusionskontrolle in der Gesetzlichen Krankenversicherung in Deutschland

Since the Health Care Competition Act (Gesetz zur Stärkung des Wettbewerbs in der Gesetzlichen Krankenversicherung) came into effect on 1st April 2007, a significant consolidation process within the statutory health insurance (GKV) in Germany has begun, emphasizing the need for regulated merger control. The conflicts that currently exist between social law and competition law are limiting factors in this. This article examines in detail the existing conflicts and seeks possible solutions for regulated merger control in the field of the GKV that conform both to the regulations in social law and to the regulations regarding competition. On the basis of the Herfindahl-Hirschman Index, a solution scenario is developed which would eliminate the existing areas of conflict in GKV merger control almost without exception and which could even be applied in the field of private health insurance (PKV) in the case of an ongoing assimilation of GKV and PKV.     

Sequential location games

We study location games where market entry is costly and occurs sequentially, and where consumers are nonuniformly distributed over the unit interval. We show that for certain classes of densities, including monotone and—under some additional restrictions—hump‐shaped and U‐shaped ones, equilibrium locations can be determined independently of when they are occupied. Our analysis reveals a number of peculiarities of the uniform distribution. Extensions of the model allow for price competition and advertisement in media markets, winner‐take‐all competition, trade‐offs between profits in the short and the long run, and firms operating multiple outlets.