The Bankruptcy Cost of the Life Insurance Industry Under Regulatory Forbearance

Abstract

In this study the Taiwan Insurance Guaranty Fund (TIGF) is introduced to investigate the ex ante assessment insurance guaranty scheme. We study the bankruptcy cost when a financially troubled life insurer is taken over by TIGF. The pricing formula of the fair premium of TIGF incorporating the regulatory forbearance is derived. The embedded Parisian option due to regulatory forbearance on fair premiums is investigated. The numerical results show that leverage ratio, asset volatility, grace period, and intervention criterion influence the default costs. Asset volatility has a significant effect on the default option, while leverage ratio is shown to aggravate the negative influence from the volatility of risky asset. Furthermore, the numerical analysis concludes that the premium for the insurance guaranty fund is risk sensitive and that a risk-based premium scheme could be implemented, hence, to ease the moral hazard.     

Facts & figures: Value‐for‐money auditing in local government; Access to information

Although there have been restrictions on access to health care since the inception of the National Health Service (NHS), there has been increasing debate on rationing and priority-setting following the changes introduced from 1991. Much of this debate has been fuelled by the fact that local Health Authorities (HAs), working with limited budgets to purchase health care services for their local population, must set priorities in order to remain within their budget. Some commentators go further and argue that health care rationing is both necessary and inevitable. Others suggest that acceptance of the necessity of rationing may be self-defeating, and question the underlying assumptions. This article reviews some of the arguments and asks whether health care rationing is really necessary.     

Relative Hedging of Systematic Mortality Risk

A number of problematic issues have arisen in anticipation of the potential role of molecular tests for genetic predispositions to illness in risk assessment by insurance underwriters. We argue in this paper that the regrettable history and current risks of genetic discrimination warrant a presumption that genetic predisposition status should not be used in any nonmedical contexts, unless compelling evidence can demonstrate that serious harm will result to third-party interests without such use. We argue that insurers should not be able to initiate testing for genetic predisposition. We also argue that there are many reasons to doubt whether patients’ test results will result in such serious adverse selection as to cause substantial harm to insurance markets, except possibly at higher policy amounts in life or disability income insurance. We conclude that the burden of proof must be on insurers to demonstrate necessity of use in specific cases in which test availability shows high probability of imminent, serious harm to insurance markets.     

The changing nature of riots in the contemporary metropolis from ideology to identity: lessons from the recent UK riots

Whereas past episodes of rioting in UK cities confronted the state authorities with a conscious and collective political problem – either through opposition to job losses or to institutional racism – in the post-political climate today we witness a shift towards individual action driven more by identity than by ideology. The one element that united the otherwise disaggregated rioters across the UK recently was more their taste in expensive sportswear (branded trainers) and electrical goods (plasma television screens) than anything else. Far from being a backlash against the police shooting of a petty, local black criminal in north London, or to the austerity measures introduced by the Liberal-Conservative government to combat the UK state deficit, some commentators suggest that what we now see is the product of a generation brought up on welfare for whom the old allegiances of work, family and community have lost their meaning and who, accordingly, are only able to assert their identity through the expression of their consumer tastes. This article examines what really drove the recent UK riots and explores the twin crises – of authority and of identity that they have exposed.     

Embedded ties and the acquisition of competitive capabilities

We build on previous research that explores the external acquisition of competitive capabilities through the embedded ties that firms form in networks and alliances. While information sharing and trust have been theorized to be key features of the interorganizational ties that facilitate the acquisition of competitive capabilities, we argue that these mechanisms provide an incomplete explanation because they do not fully address the partially tacit nature of the knowledge that underlies competitive capabilities. Joint problem‐solving arrangements play a prominent role in capability acquisition by promoting the transfer of complex and difficult‐to‐codify knowledge. Drawing on a set of case studies and a survey of 234 job shop manufacturers we find support for the role of joint problem solving with suppliers in facilitating the acquisition of competitive capabilities. Copyright © 2005 John Wiley & Sons, Ltd.     

Designing an electronic auction market for complex ‘smart parts’ logistics: Options based on LeBaron's computational stock market

Modern technologies, such as RFID, offer never-before seen learning abilities to parts moving in supply chains. Logistics systems may be understood as complex adaptive logistics systems (CALS). They also may be conceived as electronic auction markets as ‘smart parts’ bid for the best routing and pricing from transportation firms. To ensure the world-wide functionality and efficiency of CALS transportation markets, we suggest the utility of an agent-based computational market design based on Blake LeBaron's stock-market model. Given that parts may be more or less smart, markets more or less complex, and self-organizing CALS systems probabilistically subject to the bullwhip effect, we suggest nine different computational CALS market-design options, offering more adaptivity to unexpected environmental contingencies.     

Firing Blanks? An Analysis of Discursive Struggle in HRM

ABSTRACT   We revisit Karen Legge's (2001 ) critique of HRM in which she argues that the attempt of modernist/positivist HRM research to show that HRM improves organizational performance is a 'spent round'. We note that despite spirited challenges by Legge and others, the discourse of HRM is becoming increasingly dominant. Accordingly, we use discourse analysis to examine why this might be the case. Specifically, we analyse the texts produced in the engagement between Karen Legge and David Guest to show how modernist/positivist texts like those of Guest have been successful in constructing an identity for HRM and embedding it in the broader academic discourse concerning the employment relationship, while critical researchers like Legge face a number of difficulties in producing 'counter-texts'.     

A two-step approach to account for unobserved spatial heterogeneity

A two-step approach to account for unobserved spatial heterogeneity. Spatial Economic Analysis. Empirical analysis in economics often faces the difficulty that the data are correlated and heterogeneous in some unknown form. Spatial econometric models have been widely used to account for dependence structures, but the problem of directly dealing with unobserved spatial heterogeneity has been largely unexplored. The problem can be serious particularly if we have no prior information justified by economic theory. In this paper we propose a two-step procedure to identify endogenously spatial regimes in the first step and to account for spatial dependence in the second step. This procedure is applied to hedonic house price analysis.     

Dynamic spatial autoregressive models with autoregressive and heteroskedastic disturbances

We propose a new class of models specifically tailored for spatiotemporal data analysis. To this end, we generalize the spatial autoregressive model with autoregressive and heteroskedastic disturbances, that is, SARAR(1, 1), by exploiting the recent advancements in score‐driven (SD) models typically used in time series econometrics. In particular, we allow for time‐varying spatial autoregressive coefficients as well as time‐varying regressor coefficients and cross‐sectional standard deviations. We report an extensive Monte Carlo simulation study in order to investigate the finite‐sample properties of the maximum likelihood estimator for the new class of models as well as its flexibility in explaining a misspecified dynamic spatial dependence process. The new proposed class of models is found to be economically preferred by rational investors through an application to portfolio optimization.     

Employee organizational commitment: the influence of cultural and organizational factors in the Australian manufacturing industry

The importance of enhancing employee organizational commitment (EOC) is highlighted by the extensive literature revealing its positive impact on employees' job performance, reducing absenteeism and turnover rates, and improving employees' adaptability to organizational change. This study provides an insight into how EOC levels can be enhanced by examining the contextual factors that can influence EOC. Specifically, the study examines the association between cultural, organizational, and demographic factors with the level of EOC in the Australian manufacturing industry. Data were collected by a survey questionnaire from a random sample of 500 managers with the results revealing that two cultural factors (outcome orientation and stability) and three organizational factors (organizational size, perceived organizational support and job satisfaction) were found to be significantly associated with the level of EOC. Further analysis provides a preliminary insight into how to enhance the EOC of specific managers with different cultural and organizational factors found to be associated with the EOC of managers at different levels in the organizational hierarchy. The findings have important implications for practitioners attempting to improve the level of EOC of their employees with the subsequent enhancements in the level of EOC likely to contribute to improvements in productivity and growth in the Australian manufacturing industry.