Life expectancy--a commentary on this life table variable

In 1992, I wrote an article on a method of modifying the Decennial US Life Table to accommodate any pattern of excess mortality expressed in terms of excess death rate (EDR), for the specific purpose of calculating the reduced life expectancy, e. I believe this was the first article published in the Journal of Insurance Medicine (JIM) that dealt specifically with life expectancy as an index of survival and risk appraisal, never used in the classification of extra mortality risk in applicants for life insurance. In this commentary, I discuss the 1989-91 US Decennial Life Table in detail. I link the subject matter of the 1992 article with several more recent articles that also focus on the utility of life expectancy in underwriting structured settlement annuities and preparing reports on life expectancy for an attorney in a tort case. A few references are given for further reading on life table methodology and its use in the most accurate estimate of life expectancy, given the inherent limitations of the life table and the limited duration of follow-up studies.     

Pricing currency options under double exponential jump diffusion in a Markov-modulated HJM economy

Extending the framework of Amin and Jarrow (J Int Money Financ 10:310–329, 1991) and Bo et al. (Insur Math Econ 46:461–469, 2010), this study provides a theoretical exploration of currency options pricing under the presence of interest-rate regime shifts and exchange-rate asymmetric jumps. Evidence of interest-rate regime shifts inferred from UK and US zero coupon bond yields provides support for the regime-switching specifications which we reflect upon the domestic and foreign forward rates. Results of statistical tests conducted on JPY/USD and EUR/USD FX rates provide further support the rationale behind using a double exponential jump diffusion process within a Markov modulated Heath–Jarrow–Morton economy. Our numerical results suggest that, the pricing performance of our model is closely comparable to the Bo-Wang-Yang model for at-the-money options, yet yields improvements in percentage root mean errors for in-the-money options.     

Party realignments and the growth of federal economic regulation, 1861–1986

This article explains when and why the federal government passed laws with the intended goal of maintaining or improving a particular industry or segment of an industry. The adoption of regulatory laws across time will be described, and the surges and declines in the distribution explained. The empirical analysis covers the years 1861–1986.This article is an abbreviated version of a paper prepared for the 1988 Conference Perspectives on Banking Regulation, Federal Reserve Bank of Cleveland, November 3–4, 1988. I am very indebted to George J. Benston who allowed me to revise the paper in response to his criticisms.     

Observations on measuring the differences between domestic accounting standards and IAS: A reply

In the commentary that precedes this reply, Nobes makes several comments on our article published in this journal (Ding, Y., Hope, O.-K., Jeanjean, T., Stolowy, H., 2007. Differences between domestic accounting standards and IAS: measurement, determinants and implications. Journal of Accounting and Public Policy 26, 1–38). In our reply, we start with the key issue raised: the comment on the distinction between accounting practices (de facto) and accounting regulations (de jure). We then discuss the IAS bias in the “GAAP 2001” study, before presenting our reply on the endogeneity issue and on the robustness check for the “divergence” score. We conclude with a discussion of the separate dimensions of absence vs. divergence.     

How to prepare a life expectancy report for an attorney in a tort case

The purpose of this methodology article is to describe a suitable format for a legally acceptable report on the life expectancy of the principal in a tort case that is being advocated or defended by an attorney. Life insurance medical directors and underwriters are clearly skilled and experienced in mortality risk classification for life insurance. However, the judicial system is accustomed to measuring excess mortality only in terms of reduced life expectancy. The analyst preparing the report must convert the excess mortality into a figure for reduced life expectancy and compare this with the life expectancy of persons matched by age, sex and race in the latest Decennial US Life Tables. This process is different from the life insurance underwriting process. A life table projected to age 109 must be constructed as an essential part of the report, and the entire process must be presented clearly and convincingly. There are good reasons why the excess death rate (EDR) should be used as the index of excess mortality in constructing the life table, in preference to the mortality ratio (MR), which is used most of the time in life insurance risk classification. All of these considerations are discussed in this article, which is based on a sample of 40 cases handled by the author, a retired life insurance medical director.     

中资外资人身险公司竞争力评价比较——基于“中国保险公司竞争力评价研究报告（2011）”

随着加入世界贸易组织(WTO)和保险市场的开放,中国的保险业出现了飞速发展。机遇与挑战并存,在大量资金、先进技术流入的同时,中国保险公司的竞争力到底如何?在竞争力方面,中资、外资保险公司各自的表现如何?以"2011年保险公司竞争力研究报告"的数据为依据,通过将"中资外资"这样一个定性的概念用数学上定量的形式表现在数学模型中,进而分析定性因素"中资、外资"对人身险公司竞争力的影响。     

The Impact of the Secondary Market on Life Insurers' Surrender Profits

Life insurers often claim that the life settlement industry reduces their surrender profits and leads to an adverse shift in their portfolio of insured risks; that is, high risks remain in the portfolio instead of surrendering. In this article, we aim to quantify the effect of altered surrender behavior––subject to the health status of an insured––in a portfolio of life insurance contracts on the surrender profits of primary insurers. Our model includes mortality heterogeneity by applying a stochastic frailty factor to a mortality table. We additionally analyze the impact of the premium payment method by comparing results for annual and single premium payments.     

Nuptiality,fertility, and reproductivity

Abstract

During the last few years quite a number of investigations – private as well as official– have been devoted to the study, by numerical methods, of the effect of a given mortality, and fertility (or nativity) on population growth. Considerable progress has also been made – above all by the researches of A. J. LOTKA – with the abstract mathematical treatment of this problem which leads to certain integral equations with interesting asymptotic properties. Until quite recently, however, no account has been taken of the effect of different marriage rates, or rates of nuptiality. For the sake of simplicity the fertility has, in fact, been assumed to have a certain value for each age-group of women as a whole, without any distinction whatever between married and unmarried women. This is of course only a first approach to the more general and more important problem of studying the combined effect of a given mortality, a given nuptiality, and a given fertility of married as well as of unmarried women.     

CAMEL ratings and the CD market

This article investigates the relationship between CD rates as a measure of bank risk and the confidential CAMEL scores assigned to a bank as a result of an onsite examination. CAMEL ratings determine whether a bank is placed on the problem list and expresses the examiner's belief that the bank should be subjected to enhanced surveillance. In the view of regulators, CAMEL ratings are based on inside information and hence should be confidential. The empirical results in this article suggest that CAMEL ratings are primarily proxies for available market information about the quality of a bank.The first draft of this article was prepared while the author was a Visiting Scholar at the Federal Deposit Insurance Corporation in the summer of 1988. This article reflects the opinions and analysis of the author and not the Federal Deposit Insurance Corporation     

Seasonal mortality for fractional ages in short term life insurance

Abstract

Fernández-Durán, and Gregorio-Domínguez, Seasonal Mortality for Fractional Ages in Life Insurance. Scandinavian Actuarial Journal. A uniform distribution of deaths between integral ages is a widely used assumption for estimating future-lifetimes; however, this assumption does not necessarily reflect the true distribution of deaths throughout the year. We propose the use of a seasonal mortality assumption for estimating the distribution of future-lifetimes between integral ages: this assumption accounts for the number of deaths that occurs in given months of the year, including the excess mortality that is observed in winter months. The impact of this seasonal mortality assumption on short-term life insurance premium calculations is then examined by applying the proposed assumption to Mexican mortality data.     

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.     

Cambridge Business Conferences: A Case Study of Strategic Cost Analysis

This case follows Shank, and Govindarajan (1988)in developing a scenario which provides opportunities for both “relevant cost” and “strategic” analyses. The case focuses on the use of relevant costs in a practical decision-making framework. It requires a distinction between fixed, variable, sunk and discretionary costs and a facility with break-even analysis. Further, it highlights the importance of economic and marketing reality to cost-based decisions.     

Mortality experience of life annuitants insured with thirteen Swedish offices during the period 1900–1924.

Abstract

To the Scandinavian Life Insurance Congress in Oslo 1926 an investigation into the mortality of annnitants was presented by thirteen Swedish Life Insurance Companies1 The investigation was executed by a committee consisting of Harald Cramér, Reinh. Palmqvist and Iwar Sjögren.      

Modeling of group-specific mortality in China using a modified Lee–Carter model

The paper assesses sex-age-specific mortality rates of the four groups of people in China, the country, cities, towns, and counties, based on the mortality data from the China Population Statistics Yearbooks (1988–2009) using a newly proposed modified Lee–Carter model. The results show that in general, the expected age-specific mortality rates decrease over the years, and the decreasing speed increased in the past decade. During 2000–2008, the expected mortality rates decreased over the years for females of all ages and groups and males in cities, remained with no changes for males ages 13–36 in the country and towns, but increased for males ages 13–43 in counties. Predictions for 2009 are made based on the 2000–2008 data, and comparisons to the observed rates from an annual survey show that they match each other well except for males ages 13–43 in counties, whose mortality rates reached record highs around 2005, and bounced back to the level of 2000 in 2008 and was reduced a little further in 2009, benefiting from the promulgations and enforcements of some safety regulations by the government on construction and mining sites where most labors are from counties. The predicted age-specific mortality rates from the model are compared to the assumed rates in the China Life Insurance Mortality Table (2000–2003) promulgated by the China Insurance Regulatory Commission, and they show a great deal of similarity in terms of changing trends over the ages.     

Life table methodology applied to NHANES II database for analysis of mortality associated with cholesterol/HDL ratios

This article describes the association between total cholesterol to high-density lipoprotein (HDL)-cholesterol ratios and all-cause mortality in a large cohort of Americans with nearly 17 years of follow-up. Detailed actuarial life table methodology was used. It concludes that the relationship is best described as a J-shaped curve.     

Book Reviews

Book reviewed in this article: Stock Market Anomalies. By ELROY DIMSON, editor. Cambridge, UK: Cambridge University Press, 1988. Pp. xiii + 295. Bond Markets, Analysis and Strategies. By FRANK J. FABOZZI and T. DESSA FABOZZI. Englewood Cliffs, NJ: Prentice Hall, 1989. Pp. xx + 347. The Japanese Stock Market: Pricing Systems and Accounting Information. By SHIGEKI SAKAKIBARA, HIDETOSHI YAMAJI, HISAKATSU SAKURAI, KENGO SHIROSHITA, and SHIMON FUKUDA. New York: Praeger Publishers, 1988. Pp. xvi + 156.     

Comparing Professions in UK and German-Speaking Management Accounting

This paper studies professional education in management accounting and the ways in which management accounting professions establish jurisdictional claims about management accounting work in the UK and German-speaking countries, respectively. We adopt a comparative approach drawing on the framework of systems of professions and the distinction between public, legal and workplace jurisdiction [Abbott, A. (1988 Abbott, A. (1988). The system of professions: An essay on the division of expert labor. Chicago, IL: University of Chicago Press.[Crossref] , [Google Scholar]). The system of professions: An essay on the division of expert labor. Chicago, IL: University of Chicago Press]. Our findings highlight some notable differences between the UK and German-speaking countries with respect to professional management accounting education, the jurisdictional claims that the professions make as well as the establishment and history of professional institutes for management accounting. Based on this analysis, the paper identifies a dilemma or at least a challenge for policy-makers with respect to balancing the need for a context-dependent model of professional education with a need for comparability and convergence.     

Review and extension of Bhattacharyya's Modern Accounting Concepts in Kautilya's Arthasastra

This is a discussion of the theoretical aspects of accounting as they emerged in India during the Maurya period (c.321 BC to c.184 BC) in Kautilya's Arthasastra (c.300 BC) - the very first known treatise to deal with accounting aspects in the history of our discipline. Pertinent evidence can be found in an article by Choudhury (1982) and in Bhattacharyya's (1988) book, Modern Accounting Concepts in Kautilya's Arthasastra. This book, hardly known in Western accounting circles, claims that Kautilya's ancient treatise anticipated a series of 'modern' accounting concepts. These claims are here examined on the basis of the two standard translations of the Arthasastra, the original one by Shamasastry ([1915] 1967) and an extended one by Kangle (1963). Apart from some background material, the focus of this paper is on three aspects: (1) Kautilya's various types of income (including aspects of accounting for price changes, the distinction between real and fictitious holding gains, etc.) and their possible relation to modern concepts; (2) his classification of expenditures or costs (including possibly fixed vs variable costs); and (3) his notions of capital. These aspects indicate a surprisingly long-standing need for and possible use of relatively sophisticated accounting concepts. Thus Choudhury and, particularly, Battacharyya must be praised for drawing the attention of Western accountants to different aspects of an important ancient treatise. Yet Bhattacharyya (1988) deserves to be critically investigated and interpreted, not only from a Western point of view but also from the perspective of modern price-level accounting.     

Beating the DAX,MDAX, and SDAX: investment strategies in Germany

Motivated by two recent papers of Asness et al. (J Portf Manag Fall 40(5):75–92, 2014; J Portf Manag Fall 42(1):34–52, 2015), we investigate whether momentum and value strategies outperformed a buy-and-hold strategy in the three biggest German equity indices, DAX, MDAX, and SDAX from 1988 to 2015. Our findings show that a momentum premium was present only in the SDAX and that value strategies did not work in any of the three indices. Consequently, we conclude that at least the DAX and MDAX are efficient indices and that some supposedly abnormal returns could be illusionary, as limits to arbitrage obstruct any profitable exploitation in practice. Finally, we find a negative correlation between momentum and value in the DAX and show that mixing both strategies can substantially decrease a portfolio’s risk.     

Reviewing European life insurance regulation: A marketing perspective

In 1988 the discussions about a Single European Market (SEM) in life insurance intensified. Because of the impetus the Single European Act (SEA) gave to the construction of the internal market in general, there was a greater emphasis on creating a single market in financial services. Streamlined policy-making processes and the enhancement of compromise and interaction between the Member States accompanied this on increasing and expanding issues. To identify these processes the paper surveys the literature regarding the European treaties, European decision-making procedures, and the use of European interest groups in the formulation of the Third Life Assurance Directive. Fundamentally, the paper argues that through economic and political incentives, there was a more concerted effort in the creation of a SEM in life insurance and that this creates new dynamics for the field of marketing.