Refine
Year of publication
- 2017 (212) (remove)
Document Type
- Part of Periodical (102)
- Working Paper (91)
- Article (8)
- Contribution to a Periodical (5)
- Book (4)
- Report (2)
Has Fulltext
- yes (212) (remove)
Is part of the Bibliography
- no (212)
Keywords
- Financial Institutions (41)
- Banking Supervision (22)
- Banking Resolution (20)
- BRRD (19)
- Banking Regulation (18)
- Household Finance (15)
- SSM (15)
- Bail-in (14)
- Banking Union (14)
- Capital Markets Union (14)
Institute
- Wirtschaftswissenschaften (212) (remove)
Different insurance activities exhibit different levels of persistence of shocks and volatility. For example, life insurance is typically more persistent but less volatile than non-life insurance. We examine how diversification among life, non-life insurance, and active reinsurance business affects an insurer's contribution and exposure to the risk of other companies. Our model shows that a counterparty's credit risk exposure to an insurance group substantially depends on the relative proportion of the insurance group's life and non-life business. The empirical analysis confirms this finding with respect to several measures for spillover risk. The optimal proportion of life business that minimizes spillover risk decreases with leverage of the insurance group, and increases with active reinsurance business.
Telemonitoring devices can be used to screen consumers' characteristics and mitigate information asymmetries that lead to adverse selection in insurance markets. However, some consumers value their privacy and dislike sharing private information with insurers. In the second-best efficient Wilson-Miyazaki-Spence framework, we allow for consumers to reveal their risk type for an individual subjective cost and show analytically how this affects insurance market equilibria as well as utilitarian social welfare. Our analysis shows that the choice of information disclosure with respect to revelation of their risk type can substitute deductibles for consumers whose transparency aversion is sufficiently low. This can lead to a Pareto improvement of social welfare and a Pareto efficient market allocation. However, if all consumers are offered cross-subsidizing contracts, the introduction of a transparency contract decreases or even eliminates cross-subsidies. Given the prior existence of a WMS equilibrium, utility is shifted from individuals who do not reveal their private information to those who choose to reveal. Our analysis provides a theoretical foundation for the discussion on consumer protection in the context of digitalization. It shows that new technologies bring new ways to challenge crosssubsidization in insurance markets and stresses the negative externalities that digitalization has on consumers who are not willing to take part in this development.
This paper investigates the effects of a rise in interest rate and lapse risk of endowment life insurance policies on the liquidity and solvency of life insurers. We model the book and market value balance sheet of an average German life insurer, subject to both GAAP and Solvency II regulation, featuring an existing back book of policies and an existing asset allocation calibrated by historical data. The balance sheet is then projected forward under stochastic financial markets. Lapse rates are modeled stochastically and depend on the granted guaranteed rate of return and prevailing level of interest rates. Our results suggest that in the case of a sharp increase in interest rates, policyholders sharply increase lapses and the solvency position of the insurer deteriorates in the short-run. This result is particularly driven by the interaction between a reduction in the market value of assets, large guarantees for existing policies, and a very slow adjustment of asset returns to interest rates. A sharp or gradual rise in interest rates is associated with substantial and persistent liquidity needs, that are particularly driven by lapse rates.
Under Solvency II, corporate governance requirements are a complementary, but nonetheless essential, element to build a sound regulatory framework for insurance undertakings, also to address risks not specifically mitigated by the sole solvency capital requirements. After recalling the provisions of the Second Pillar concerning the system of governance, the paper highlights the emerging regulatory trends in the corporate governance of insurance firms. Among others things, it signals the exceptional extension of the duties and responsibilities assigned to the board of directors, far beyond the traditional role of both monitoring the chief executive officer, and assessing the overall direction and strategy of the business. However, a better risk governance is not necessarily built on narrow rule-based approaches to corporate governance.
A tontine provides a mortality driven, age-increasing payout structure through the pooling of mortality. Because a tontine does not entail any guarantees, the payout structure of a tontine is determined by the pooling of individual characteristics of tontinists. Therefore, the surrender decision of single tontinists directly affects the remaining members' payouts. Nevertheless, the opportunity to surrender is crucial to the success of a tontine from a regulatory as well as a policyholder perspective. Therefore, this paper derives the fair surrender value of a tontine, first on the basis of expected values, and then incorporates the increasing payout volatility to determine an equitable surrender value. Results show that the surrender decision requires a discount on the fair surrender value as security for the remaining members. The discount intensifies in decreasing tontine size and increasing risk aversion. However, tontinists are less willing to surrender for decreasing tontine size and increasing risk aversion, creating a natural protection against tontine runs stemming from short-term liquidity shocks. Furthermore we argue that a surrender decision based on private information requires a discount on the fair surrender value as well.
Under Solvency II, corporate governance requirements are a complementary, but nonetheless essential, element to build a sound regulatory framework for insurance undertakings, also to address risks not specifically mitigated by the sole solvency capital requirements. After recalling the provisions of the second pillar concerning the system of governance, the paper is devoted to highlight the emerging regulatory trends in the corporate governance of insurance firms. Among others, it signals the exceptional extension of the duties and responsibilities assigned to the Board of directors, far beyond the traditional role of both monitoring the chief executive officer, and assessing the overall direction and strategy of the business. However, a better risk governance is not necessarily built on narrow rule-based approaches to corporate governance.
We study the impact of estimation errors of firms on social welfare. For this purpose, we present a model of the insurance market in which insurers face parameter uncertainty about expected loss sizes. As consumers react to under- and overestimation by increasing and decreasing demand, respectively, insurers require a safety loading for parameter uncertainty. If the safety loading is too small, less risk averse consumers benefit from less informed insurers by speculating on them underestimating expected losses. Otherwise, social welfare increases with insurers’ information. We empirically estimate safety loadings in the US property and casualty insurance market, and show that these are likely to be sufficiently large for consumers to benefit from more informed insurers.
Most event studies rely on cumulative abnormal returns, measured as percentage changes in stock prices, as their dependent variable. Stock price reflects the value of the operating business plus non-operating assets minus debt. Yet, many events, in particular in marketing, only influence the value of the operating business, but not non-operating assets and debt. For these cases, the authors argue that the cumulative abnormal return on the operating business, defined as the ratio between the cumulative abnormal return on stock price and the firm-specific leverage effect, is a more appropriate dependent variable. Ignoring the differences in firm-specific leverage effects inflates the impact of observations pertaining to firms with large debt and deflates those pertaining to firms with large non-operating assets. Observations of firms with high debt receive several times the weight attributed to firms with low debt. A simulation study and the reanalysis of three previously published marketing event studies shows that ignoring the firm-specific leverage effects influences an event study's results in unpredictable ways.
Master of science in international economics and economic policy : guidelines winter term 2017/2018
(2017)
One striking observation in Parkinson’s disease (PD) is the remarkable gender difference in incidence and prevalence of the disease. Data on gender differences with regard to disease onset, motor and non-motor symptoms, and dopaminergic medication are limited. Furthermore, whether estrogen status affects disease onset and progression of PD is controversially discussed. In this retrospective single center study, we extracted clinical data of 226 ambulatory PD patients and compared age of disease onset, disease stage, motor impairment, non-motor symptoms, and dopaminergic medication between genders. We applied a matched-pairs design to adjust for age and disease duration. To determine the effect of estrogen-related reproductive factors including number of children, age at menarche, and menopause on the age of onset, we applied a standardized questionnaire and performed a regression analysis. The male to female ratio in the present PD cohort was 1.9:1 (147 men vs. 79 women). Male patients showed increased motor impairment than female patients. The levodopa equivalent daily dose was increased by 18.9% in male patients compared to female patients. Matched-pairs analysis confirmed the increased dose of dopaminergic medication in male patients. No differences were observed in age of onset, type of medication, and non-motor symptoms between both groups. Female reproductive factors including number of children, age at menarche, and age at menopause were positively associated with a delay of disease onset up to 30 months. The disease-modifying role of estrogen-related outcome measures warrants further clinical and experimental studies targeting gender differences, specifically hormone-dependent pathways in PD.
Nach den Ereignissen in Gaggenau liest und hört man allenthalben von den "rechtlichen Schwierigkeiten", die hinsichtlich Verboten von Redeauftritten ausländischer Politiker bestünden. In Gaggenau hat man originär sicherheitsrechtlich argumentiert: viel zu viele Leute, viel zu kleiner Parkplatz, Chaos vorprogrammiert. Ähnliches nun in Köln: zu großer Aufwand, zu kurzfristig, Chaos vorprogrammiert. Nehmen wir einmal an, es seien im Einzelfall tragfähige Begründungen gewesen. Dann stellt sich zugleich die Frage: Was kann man tun, wenn man den Auftritt eines ausländischen Vertreters untersagen will, obwohl der Parkplatz groß genug und die Polizei ausreichend gegen Ausschreitungen gewappnet ist? ...
Risk culture during the last 2000 years - from an aleatory society to the illusion of risk control
(2017)
The culture of risk is 2000 years old, although the term “risk” developed much later. The culture of merchants making decisions under uncertainty and taking the individual responsibility for the uncertain future started with the Roman “Aleatory Society”, continued with medieval sea merchants, who made business “ad risicum et fortunam”, and sustained to the culture of entrepreneurs in times of industrialisation and dynamic economic changes in the 18th and 19th century. For all long-term commercial relationships, the culture of honourable merchants with personal decision-making and individual responsibility worked well. The successful development of sciences, statistics and engineering within the last 100 years led to the conjecture that men can “construct” an economical system with a pre-defined “clockwork” behaviour. Since probability distributions could be calculated ex-post, an illusion to control risk ex-ante became a pattern in business and banking. Based on the recent experiences with the financial crisis, a “risk culture” should understand that human “Strength of Knowledge” is limited and the “unknown unknown” can materialise. As all decisions and all commercial agreements are made under uncertainty, the culture of honourable merchants is key to achieve trust in long-term economic relations with individual responsibility, flexibility to adapt and resilience against the unknown.
WiWi news [2/2017]
(2017)
Why MREL won’t help much
(2017)
Missed opportunity
(2017)