Risk assessment of surplus appropriation schemes in participating life insurance

The aim of this paper is to analyze a life insurance company’s risk exposure with respect to different surplus appropriation schemes in participating life insurance. In this regard, three surplus appropriation schemes are considered, including the bonus system, the interest-bearing accumulation, and the system of shortening the contract term. We further examine an insurance company that offers all three schemes, i.e. each system is used for one third of the policyholders. Focus is laid on the effect of different asset portfolios and shocks to mortality on the insurer’s risk situation with respect to the policyholder’s age level at contract inception.     

The Information Use in a SME: Its Importance and Some Elements of Influence

The aim of this study is to gain some insights into the importance of the information use for the success of a SME. Consequently we examine some characteristics of the owner/manager and his firm which determine the extent of this use. The value of the model is examined for 208 Belgian SME owner/managers. Our data suggest there is a positive relation between the extent of information use and the performance of a SME. Moreover, we find that SME owner/managers with a greater strategic awareness, with less firm experience prior to the present position and with a greater desire for growth use more information. Also, smaller family ownership and intervention in strategic management, as well as greater delegation of decision making, lead to a higher information use.     

Are there economies of scale in the demand for money by firms? Some panel data estimates

We estimate elasticities of scale in the demand for money by firms using firm level panel data from Spain, the UK, and the US. This elasticity is one for Spain and the UK but smaller for the US. We find that the errors in the money demand equations contain two terms that are correlated with sales. Firstly, a permanent firm effect that captures differences in technological sophistication. Secondly, a measurement error in sales, which becomes relevant when relying on changes in sales to account for fixed effects. Failure to control for these correlated unobservable terms results in important biases in the estimated sales elasticities.     

The downside of formula apportionment: evidence on factor demand distortions

This paper investigates the impact of corporate taxes on the input factor choice of multi-jurisdictional entities (MJEs) under a formula apportionment (FA) regime. Our testing ground is the German local business tax that applies FA regulations with income apportionment according to the relative payroll share. Using unique data on the population of German firms, we find that MJEs distort their employment and payroll costs in favor of low-tax locations. On average, a 1-percentage-point-increase in the tax rate differential between an affiliate and foreign group members is found to lower the affiliate’s payroll to capital ratio by 1.9%.     

Optimal rate classification for enhanced annuities

For a given premium, enhanced annuities pay higher pensions to policyholders with impaired health. Even though risk classification is a common concept in the insurance sector and should allow insurers to increase their profitability, enhanced annuities are rarely offered outside of the United Kingdom. The paper provides a general method of determining an optimal risk classification system for enhanced annuities that will maximize an insurance company’s profits. The cost of risk classification, as well as that incurred when insureds are assigned to inappropriate risk classes (a chief component of underwriting risk), are explicitly considered.     

Critical Illness Insurances: Challenges and Opportunities for Insurers

Since the first introduction of critical illness insurance in 1983 in South Africa, the product has successfully spread to some insurance markets, especially in Asian and Anglophone countries, but market penetration remains low in other countries. For this reason and because of the increasing relevance of dread diseases, the aim of this article is to provide a first comprehensive overview of challenges and opportunities associated with critical illness products for insurers. Toward this end, we first present the various product designs, as well as the developments that have taken place within the market before comparing this form of coverage to alternative insurance products in order to better assess the market potential. Based on these assessments, we thoroughly discuss the major challenges and opportunities within the market from the insurer's perspective.     

Networks and geography in the economics of knowledge flows. A comment

This paper proposes a comment on the article by M. A. Maggioni and T. E. Uberti within this issue. It focuses on one main question: can we say that the literature on Networks and Geography has reached the initial objective assigned to it: “Demonstrate that networks and geography are the necessary ingredients for every study of the innovative process at any level of analysis: from individual agents, to institution/organization, from the regional to the national and international level”? The answer to this question is presented following three main steps: (1) How do geographical positioning and network positioning interact to impact the innovative performance? (2) What is the influence of the geography on the networking strategies (cooperation choices)? (3) What is the influence of the network upon geographical strategies (location choices)? The conclusion is that the field described by Mario Maggioni and Erika Uberti is, as their paper shows, fast expanding and already has a history and appreciable results. It still clearly appears however that much still remains to be done if the potentiality offered by the cross-use of spatial and network analysis when dealing with knowledge diffusion and its impact on innovation is to be fully exploited. No doubt that the important advances accomplished during these last years in the collecting of data related to localized relationships will provide the necessary incentives to develop the still greatly lacking micro-econometric analyses.