Risk-Based Premiums for Insurance Guaranty Funds

Insurance guaranty funds have been adopted in all states to compensate policyholders for losses resulting from insurance company insolvencies. The guaranty funds charge flat premium rates, usually a percentage of premiums. Flat premiums can induce insurers to adopt high-risk strategies, a problem that can be avoided through the use of risk-based premiums. This article develops risk-based premium formulas for three cases: a) an ongoing insurer with stochastic assets and liabilities, b) an ongoing insurer also subject to jumps in liabilities (catastrophes), and c) a policy cohort, where claims eventually run off to zero. Premium estimates are provided and compared with actual guaranty fund assessment rates.     

DETERMINISTIC, STOCHASTIC, AND SEGMENTED TRENDS IN AGGREGATE OUTPUT: A CROSS-COUNTRY ANALYSIS

This paper examines whether output per capita in 126 countriesis better described as trend or difference stationary, usingappropriate finite-sample critical values. Depending upon whetherone uses solely a test with a trend stationary null, or solelyone with a difference stationary null, very different conclusionsare obtained. This outcome suggests that it is useful to considerthe tests complementary, rather than competing. We find thatwhen a definite characterization of GDP can be made, it is verylikely to indicate a difference stationary process. However,the likelihood of making definite conclusions does vary positivelywith both income level and data quality.     

THE ECONOMICS OF LOCAL PRICE INFORMATION SERVICES

This paper outlines the development of local price comparison surveys in the United Kingdom and assesses their efficacy and value to consumers. The economic significance of such price information services is also considered.     

Defined Contribution Plans and the Distribution of Pension Wealth

Over the past 20 years, the defined benefit (DB) plan has been replaced by the defined contribution (DC) plan as the most popular form of pension plan. This study examines the likely consequences of this transformation for both the level and distribution of future pension wealth using a sample of DB and DC plans from the Survey of Consumer Finances. The results reveal that the shift from DB to DC plans is likely to simultaneously increase the level and inequality of pension wealth at retirement. The evidence also suggests that the shift to DC plans may result in less pension wealth at retirement for low‐income workers, women, and minorities.