1 - 10 of 31
-
PublicationRisk aggregation in non-life insurance: Standard models vs. internal models(North Holland Publ. Co., 2020-11)Standard models for capital requirements restrict the correlation between different risk factors to the linear measure and do not consider undertaking-specific parameters. We propose a comprehensive framework for risk aggregation in non-life insurance using copulas and two levels of aggregation: base-level aggregation (different assets, different lines of insurance) and top-level aggregation (assets and liabilities). Using empirical data from Korean and German insurance companies, we compare our internal risk model with three regulatory standard models (Korean RBC, Solvency II, Swiss Solvency Test). We show that the standard models significantly overestimate the potential risk size for the insurers considered in this study by 61.2% and 57.8% on average for the Korean and the German cases respectively, where almost half of the overestimation level results from the uniform risk profile imposed by regulations and the other half comes from the linear correlation assumption. The differences between standard models and internal models might distort competition when both approaches are used in one market.Type:Journal:Volume:
Scopus© Citations 7 -
PublicationCyber risk research impeded by disciplinary barriers(AAAS, American Assoc. for the Advancement of Science, 2019-11-29)Cyber risk encompasses a broad spectrum of risks to digital systems, such as data breaches or full-fledged cyber attacks on the electric grid. Efforts to systematically advance the science of cyber risk must draw on not only computer science but also fields such as behavioral science, economics, law, management science, and political science. Yet, many scholars believe that they have sufficient understanding of other fields to comprehensively address the inherently cross-disciplinary nature of cyber risk. For example, a statistician might apply Bayesian modeling to predict future cyber events, even though it is not entirely clear what bearing historical cyber events have on future ones. Computer scientists might write on data protection laws, yet with little knowledge of legal jurisdiction issues. Such questions of disciplinary ownership, the inability to coordinate across disciplines, and the undefined scope of the problem domain have thus plagued inherently cross-disciplinary cyber risk research. Drawing on global expertise and challenges from industry, academia, nonprofit organizations, and governments, we adapted the classical risk-management process to identify core research questions for cyber risk, gaps in knowledge that need to be addressed for advances in security, and opportunities for cross-disciplinary collaboration for each area. Although we mention specific disciplines reflective of our backgrounds, these are not the only ones that should be conducting cyber risk research.Type:Journal:Volume:Issue:
Scopus© Citations 36 -
PublicationCyber Risk and Cyber Risk Insurance: Status Quo and Future Research(Palgrave Macmillan, 2018)The Geneva Papers on Risk and Insurance—Issues and Practice has a long tradition of publishing special issues on emerging topics in the insurance industry. Recent topics include extreme events and climate risk, microinsurance and longevity. There have also been several special issues devoted to the fields of pensions, health, and regulation. Currently, the growing economic and social importance of cyber risk is seen in the media on a daily basis. In addition, businesses are facing cyber risks that can lead to considerable corporate losses. Although first studies on cyber risk have been published, there is still an enormous lack of information on its empirical properties. The goal of this special issue is not only to present some interesting articles on one of the timeliest topics in insurance research and practice but also to stimulate future research on cyber risk and cyber risk insurance. This editorial summarises the papers included in this special issue and highlights some of the potential avenues for future research.Type:Journal:Volume:Issue:
Scopus© Citations 15 -
PublicationCosts and Benefits of Financial Regulation – An Empirical Assessment for Insurance Companies(Palgrave Journals, 2016)We analyse the costs and benefits of financial regulation based on a survey of 76 insurers from Austria, Germany and Switzerland. Our analysis includes both established and new empirical measures for regulatory costs and benefits. This is the first paper that tries to take costs and benefits combined into account using a latent class regression with covariates. Moreover, we analyse regulatory costs and benefits not only on an industry level, but also at the company level. This allows us to empirically test fundamental principles of financial regulation such as proportionality: the intensity of regulation should reflect the firm-specific amount and complexity of the risk taken. Our findings do not support the proportionality principle; for example, regulatory costs cannot be explained by differences in business complexity. One potential policy implication is that the proportionality principle needs to be more carefully applied to financial regulation.Type:Journal:Volume:Issue:
-
PublicationSystemic Risk in the Insurance Sector: Review and Directions for Future Research(Wiley-Blackwell, 2016)This article reviews the extant research on systemic risk in the insurance sector and outlines new areas of research in this field. We summarize and classify 48 theoretical and empirical research papers from both academia and practitioner organizations. The survey reveals that traditional insurance activity in the life, nonlife, and reinsurance sectors neither contributes to systemic risk nor increases insurers’ vulnerability to impairments of the financial system. However, nontraditional activities (e.g., credit default swap underwriting) might increase vulnerability, and life insurers might be more vulnerable than nonlife insurers due to higher leverage. Whether nontraditional activities also contribute to systemic risk is not entirely clear; however, the activities with the potential to contribute to systemic risk include underwriting financial derivatives and providing financial guarantees. This article is not only likely of interest to academics but also highly relevant for the industry, regulators, and policymakers.
Scopus© Citations 24 -
PublicationInsurability of Cyber Risk: An Empirical AnalysisThis paper discusses the adequacy of insurance for managing cyber risk. To this end, we extract 994 cases of cyber losses from an operational risk database and analyse their statistical properties. Based on the empirical results and recent literature, we investigate the insurability of cyber risk by systematically reviewing the set of criteria introduced by Berliner (1982). Our findings emphasise the distinct characteristics of cyber risks compared with other operational risks and bring to light significant problems resulting from highly interrelated losses, lack of data and severe information asymmetries. These problems hinder the development of a sustainable cyber insurance market. We finish by discussing how cyber risk exposure may be better managed and make several sug-gestions for future research.
Scopus© Citations 186 -
PublicationIntergenerational Transfers and the Stability of the Swiss Retirement System(Palgrave Macmillan Ltd., 2013-10)We analyse intended and unintended solidarity transfers between the young and the old in the Swiss retirement system. In addition to the intended solidarity transfers in the pay-as-you-go system, we identify a systematic unintended solidarity transfer from the active population to new retirees in the occupational pension system, which occurs due to the statutory conversion rates not being actuarially fair. After providing an overview of intergenerational transfers in Switzerland, we briefly review the Swiss retirement system. Then, we quantify the unintended transfer in the occupational pension system and finish by discussing several policy measures that could be implemented to avoid this intergenerational transfer. The unintended solidarity transfer casts some doubt on the financial stability and social acceptability of the Swiss retirement system, which is often considered one of the best in the world. As such, the problems of and recommendations for the Swiss system are of interest to other pension systems as well.
Scopus© Citations 2 -
PublicationInsurability in Microinsurance Markets: An Analysis of Problems and Potential SolutionsThis paper provides a comprehensive analysis of the insurability of risks in microinsurance markets. Our aim is to enhance the understanding of impediments to and facilitators of microinsurance from an economic perspective and outline potential solutions. The motivation for conducting this analysis arises from two important aspects. (1) Despite strong growth of microinsurance markets in recent years, more than 90 per cent of the poor population in developing countries have limited or no access to insurance. (2) Industry practitioners frequently highlight problems in the insurability of risks that hinder the development of microinsurance. We review 131 papers and find that the most severe problems stem from insufficient resources for risk evaluation, small size of insurance groups, information asymmetries and the size of the insurance premium. On the basis of the analysis, we discuss a number of potential solutions such as, for example, a cooperative microinsurance architecture.
Scopus© Citations 46 -
PublicationMaximum Technical Interest Rates in Life Insurance in Europe and the United States: An Overview and Comparison(Palgrave Macmillan, 2012-10-10)We compare the regulatory environment for the maximum technical interest rate of life insurance contracts in four European countries and the United States. In Germany, Austria and Switzerland, the maximum rate is driven by a long-term rolling average of government bond yields and is adjusted by the regulator. In the U.S., corporate bond yields are used and the regulator is not directly involved in setting the maximum rate. The regime implemented in the United Kingdom is unique: instead of a rules-based "one-size-fits-all" approach, the maximum rate is determined by a company-specific principle-based method. We provide a comparative analysis of the different systems and conduct a numerical analysis to investigate how the maximum rate will develop under predefined interest rate scenarios. The discussion is highly relevant in light of Solvency II, a regime that may fundamentally change regulation of the maximum technical interest rate.
Scopus© Citations 19 -
PublicationIs there Market Discipline in the European Insurance Industry? An Analysis of the German Insurance Market(Palgrave Macmillan, 2012-09)
Scopus© Citations 19
