Similar Journals
|
Geneva Papers on Risk and Insurance - Issues and Practice
Journal Prestige (SJR): 0.392  Citation Impact (citeScore): 1 Number of Followers: 13  Hybrid journal (It can contain Open Access articles)ISSN (Print) 1018-5895 - ISSN (Online) 1468-0440 Published by Springer-Verlag  [2468 journals]
|
- Providing pandemic business interruption coverage with double trigger cat
bonds-
Free pre-print version: Loading...Rate this result: What is this?Please help us test our new pre-print finding feature by giving the pre-print link a rating.
A 5 star rating indicates the linked pre-print has the exact same content as the published article.
Abstract: The aim of this paper is to show how qualified investors in cat bonds can offer adequate pandemic business interruption protection in a comprehensive public–private coverage scheme. First, we propose a numerical model to expose how cat bonds can contribute to complement standard re/insurance by improving coverage of cedents even though risks are positively correlated during a pandemic. Second, we introduce double trigger pandemic business interruption cat bonds, which we name PBI bonds, and discuss their precise characteristics to provide efficient coverage. A first trigger should be pulled when the World Health Organization declares a Public Health Emergency of International Concern (PHEIC). The second trigger determines the payout of the bond based on the modelised business interruption losses of an industry in a country. We discuss moral hazard, basis risk, correlation and liquidity issues which are critical in the context of a pandemic. Third, we simulate the life of theoretical PBI bonds in the restaurant industry in France by using data gathered during the COVID-19 pandemic.
PubDate: 2023-05-30
-
- Greenfield foreign direct investments and insurance market
diversification: a cross-country analysis-
Free pre-print version: Loading...Rate this result: What is this?Please help us test our new pre-print finding feature by giving the pre-print link a rating.
A 5 star rating indicates the linked pre-print has the exact same content as the published article.
Abstract: Foreign direct investments (FDIs) influence insurance markets directly, through foreign insurers’ participation in domestic markets, and indirectly, through cross-sectoral spillover effects. This article focuses on the indirect effects and examines the relationship between greenfield FDIs and diversification in European insurance markets. Using panel data of 28 countries for the period 2004–2019, we find that greenfield FDIs induce greater diversification of insurance markets. Our results suggest a non-linear relationship and potential mediating effects of financial development on the FDI–insurance relationship. Robustness tests using different measures of market diversification, model specifications and averaging of the data show consistent results.
PubDate: 2023-05-22
-
- COVID-19 off-label uses of medicines: the role of civil liability and
regulation-
Free pre-print version: Loading...Rate this result: What is this?Please help us test our new pre-print finding feature by giving the pre-print link a rating.
A 5 star rating indicates the linked pre-print has the exact same content as the published article.
Abstract: Physicians can prescribe medicines for different indications than the tested and authorised ones. Such ‘off-label’ uses expand therapeutic options but also create uncertainties. The COVID-19 pandemic triggered new off-label uses and, despite issues being reported in the literature, these have not resulted in substantial personal injury litigation in the EU. Against this backdrop, this article argues that civil liability plays, in fact, a limited role in off-label uses. In particular, civil liability may incentivise health actors to follow and react to the development of the evidence basis for off-label uses. However, it is ultimately unable to incentivise the conduct of additional research on off-label uses. This is problematic, as off-label research is key to protecting patients and is recommended by international medical ethics. The article concludes by critically discussing proposed mechanisms to incentivise off-label research. It argues that extending civil liability for unknown risks may have undesired effects on insurability and innovation, and most regulatory proposals seem ineffective. Building on the 2014 Italian reform of off-label uses, the article proposes the establishment of a fund financed by mandatory contributions from the industry, which should be used by pharmaceutical regulators to promote off-label research and develop guidelines for prescribers.
PubDate: 2023-05-19
-
- Risk mitigation services in cyber insurance: optimal contract design and
price structure-
Free pre-print version: Loading...Rate this result: What is this?Please help us test our new pre-print finding feature by giving the pre-print link a rating.
A 5 star rating indicates the linked pre-print has the exact same content as the published article.
Abstract: As the cyber insurance market is expanding and cyber insurance policies continue to mature, the potential of including pre-incident and post-incident services into cyber policies is being recognised by insurers and insurance buyers. This work addresses the question of how such services should be priced from the insurer’s viewpoint, i.e. under which conditions it is rational for a profit-maximising, risk-neutral or risk-averse insurer to share the costs of providing risk mitigation services. The interaction between insurance buyer and seller is modelled as a Stackelberg game, where both parties use distortion risk measures to model their individual risk aversion. After linking the notions of pre-incident and post-incident services to the concepts of self-protection and self-insurance, we show that when pricing a single contract, the insurer would always shift the full cost of self-protection services to the insured; however, this does not generally hold for the pricing of self-insurance services or when taking a portfolio viewpoint. We illustrate the latter statement using toy examples of risks with dependence mechanisms representative in the cyber context.
PubDate: 2023-05-08
-
- Economic policy uncertainty and directors and officers liability
insurance: a perspective on capital market pressures-
Free pre-print version: Loading...Rate this result: What is this?Please help us test our new pre-print finding feature by giving the pre-print link a rating.
A 5 star rating indicates the linked pre-print has the exact same content as the published article.
Abstract: This study investigates the effects of economic policy uncertainty (EPU) on corporate purchases of directors and officers liability insurance from the perspective of capital market pressures. Using data on A-share Chinese listed firms from 2010 to 2021, our theoretical analysis and empirical tests reveal that higher levels of EPU increase purchases. The theoretical analysis and mediating tests reveal that capital market pressures play a mediating role in the relationship between EPU and purchases. This study also finds that the indirect ways in which EPU increases purchases consider the need for firms to mitigate litigation risks and take advantage of insurance governance. The heterogeneous analysis and tests reveal that EPU increases purchases more significantly in firms that have higher managerial agency costs, have lower corporate transparency, and are in industries with higher competition. The findings are significant for improving the risk management system in China’s capital markets.
PubDate: 2023-05-07
-
- Modelling maximum cyber incident losses of German organisations: an
empirical study and modified extreme value distribution approach-
Free pre-print version: Loading...Rate this result: What is this?Please help us test our new pre-print finding feature by giving the pre-print link a rating.
A 5 star rating indicates the linked pre-print has the exact same content as the published article.
Abstract: Cyber incidents are among the most critical business risks for organisations and can lead to large financial losses. However, previous research on loss modelling is based on unassured data sources because the representativeness and completeness of op-risk databases cannot be assured. Moreover, there is a lack of modelling approaches that focus on the tail behaviour and adequately account for extreme losses. In this paper, we introduce a novel ‘tempered’ generalised extreme value (GEV) approach. Based on a stratified random sample of 5000 interviewed German organisations, we model different loss distributions and compare them to our empirical data using graphical analysis and goodness-of-fit tests. We differentiate various subsamples (industry, size, attack type, loss type) and find our modified GEV outperforms other distributions, such as the lognormal and Weibull distributions. Finally, we calculate losses for the German economy, present application examples, derive implications as well as discuss the comparison of loss estimates in the literature.
PubDate: 2023-04-13
-
- Assessing U.S. insurance firms' climate change impact and response
-
Free pre-print version: Loading...Rate this result: What is this?Please help us test our new pre-print finding feature by giving the pre-print link a rating.
A 5 star rating indicates the linked pre-print has the exact same content as the published article.
Abstract: Climate change poses a serious risk for insurance firms, threatening their sustainability from numerous channels of impact. Assessing this impact, however, is not straightforward. We assess and distinguish between insurance firms by impact and response to climate change and relate the firms’ financial characteristics to climate risk exposure. A text mining approach using climate change sub-dictionaries on risk exposure, impact, and response, and a nested feature extraction method is developed to define and classify insurance firms’ adaptation levels to climate change. These features reveal that casualty insurance firms are most susceptible to acute climate risk, while life insurance firms are more prone to chronic climate risk. Insurance firms with the highest exposure to climate change present a high level of adaptation to pecuniary impact of the risk. Nevertheless, many firms with exposure remain inadequately prepared for climate change and firms with high exposure show relatively higher financial weakness.
PubDate: 2023-04-12
-
- Why banks insure structured commodity trade finance risk: evidence from a
worldwide survey-
Free pre-print version: Loading...Rate this result: What is this?Please help us test our new pre-print finding feature by giving the pre-print link a rating.
A 5 star rating indicates the linked pre-print has the exact same content as the published article.
Abstract: We identify major drivers of the demand for credit insurance, using a worldwide survey among banking executives in the structured commodity trade finance business. Our results show that a bank’s propensity to purchase insurance increases in its experience and expertise with the product, the impact of insurance coverage on its balance sheet, the risk of the underlying transaction, as well as the intensity of broker relationships. Other factors, such as the size of the commodity trade finance portfolio, the competitiveness of the insurance price, and the risks arising from commodity price volatility, seem to be of lesser relevance.
PubDate: 2023-04-12
-
- English tort law and the pandemic: the dog that has not barked
-
Free pre-print version: Loading...Rate this result: What is this?Please help us test our new pre-print finding feature by giving the pre-print link a rating.
A 5 star rating indicates the linked pre-print has the exact same content as the published article.
Abstract: As of February 2023, no case has been reported in the U.K., either in the law reports or in the media, of a victim of COVID-19 suing in tort a person or organisation alleged to have caused the victim to contract the disease. This article considers the reasons this situation might have arisen. It provisionally concludes that the main legal reasons might lie in the applicable doctrines of factual causation and goes on to discuss whether uncertainty in those doctrines should be resolved in the courts.
PubDate: 2023-04-08
-
- Modelling and predicting enterprise-level cyber risks in the context of
sparse data availability-
Free pre-print version: Loading...Rate this result: What is this?Please help us test our new pre-print finding feature by giving the pre-print link a rating.
A 5 star rating indicates the linked pre-print has the exact same content as the published article.
Abstract: Despite growing attention to cyber risks in research and practice, quantitative cyber risk assessments remain limited, mainly due to a lack of reliable data. This analysis leverages sparse historical data to quantify the financial impact of cyber incidents at the enterprise level. For this purpose, an operational risk database—which has not been previously used in cyber research—was examined to model and predict the likelihood, severity and time dependence of a company’s cyber risk exposure. The proposed model can predict a negative time correlation, indicating that individual cyber exposure is increasing if no cyber loss has been reported in previous years, and vice versa. The results suggest that the probability of a cyber incident correlates with the subindustry, with the insurance sector being particularly exposed. The predicted financial losses from a cyber incident are less extreme than cited in recent investigations. The study confirms that cyber risks are heavy-tailed, jeopardising business operations and profitability.
PubDate: 2023-04-01
-
- Insurance and enterprise: cyber insurance for ransomware
-
Free pre-print version: Loading...Rate this result: What is this?Please help us test our new pre-print finding feature by giving the pre-print link a rating.
A 5 star rating indicates the linked pre-print has the exact same content as the published article.
Abstract: Selling insurance gives insurers an incentive to manage insured risks. The “insurance-as-governance” literature demonstrates that insurers often make insurance conditional on ex ante risk reduction or mitigation. But insurance governs in support of enterprise, not security for its own sake. Tight underwriting inhibits enterprise—not only for insured businesses but also for the business of insurance. This paper highlights ex post loss reduction as a form of insurance-based governance. Drawing on interviews with industry insiders, we explore how insurers addressed the evolving problems of moral hazard, uncertainty and correlated losses since the 1990s. We find that cyber insurance developed sophisticated remedies to contain liabilities and quickly restore affected IT systems, but largely left security decisions to the insured. This facilitated enterprise in the short run but undermined security in the longer term: funding and expediting ransom payments encourages further attacks. As businesses improved their resilience, cybercriminals adapted and ransoms escalated, calling insurability into question. Yet there remains little appetite for imposing restrictive conditionality in this highly competitive market. Instead, insurers have turned to governments to contain criminal threats and cushion catastrophic losses.
PubDate: 2023-04-01
-
- New advances on cyber risk and cyber insurance
-
Free pre-print version: Loading...Rate this result: What is this?Please help us test our new pre-print finding feature by giving the pre-print link a rating.
A 5 star rating indicates the linked pre-print has the exact same content as the published article.
PubDate: 2023-04-01
-
- Business interruption insurance as a means of spreading pandemic-related
losses-
Free pre-print version: Loading...Rate this result: What is this?Please help us test our new pre-print finding feature by giving the pre-print link a rating.
A 5 star rating indicates the linked pre-print has the exact same content as the published article.
Abstract: This article discusses business interruption insurance as a measure of spreading risk in the context of the COVID-19 pandemic. In drawing a picture of how business interruption insurance has been handled and governed to date by courts and regulators in the U.K., Australia and the U.S., the contribution is specifically concerned with providing tentative answers to two questions: first, whether the design and interpretation of business interruption policies have made it a suitable means of spreading pandemic risks for policyholders; and second, how methods of resolving disputes over pandemic-related losses could improve the position of policyholders in relation to the insurance sector.
PubDate: 2023-03-27
DOI: 10.1057/s41288-023-00295-9
-
- The possibilities and limits of insurance as governance in insuring
pandemics-
Free pre-print version: Loading...Rate this result: What is this?Please help us test our new pre-print finding feature by giving the pre-print link a rating.
A 5 star rating indicates the linked pre-print has the exact same content as the published article.
Abstract: Insurance can, as has clearly been indicated in the literature, play an important role in dealing with catastrophe risks, not only as a compensation mechanism but also as a mechanism to influence the behaviour of the insured. It is the concept known as ‘insurance as governance’. However, we argue that there are limited possibilities for this role as far as the insurance of pandemics is concerned. The traditional technical tools, such as risk-based pricing, are difficult to apply. In addition, there may, ab initio, be serious problems in insuring pandemics within one of the main conditions of insurability (controlling moral hazard through an effective risk differentiation). One remedy that is traditionally applied, more particularly for natural catastrophes, is mandatory coverage. Furthermore, the capacity problem might potentially be solved through a multilayered approach in which, in addition to insurance and reinsurance, the government could also take up a role as reinsurer of last resort. That would also have the major advantage of stimulating market solution (and potentially providing incentives for the mitigation of damages), which clearly fails in a model where the government simply bails out operators. Finally, one important regulatory intervention is that insurers should be better informed than was apparently the case during the last pandemic about exactly which type of risks are covered and which are not.
PubDate: 2023-03-21
DOI: 10.1057/s41288-023-00291-z
-
- Cyber loss model risk translates to premium mispricing and risk
sensitivity-
Free pre-print version: Loading...Rate this result: What is this?Please help us test our new pre-print finding feature by giving the pre-print link a rating.
A 5 star rating indicates the linked pre-print has the exact same content as the published article.
Abstract: In this paper we focus on model risk and risk sensitivity when addressing the insurability of cyber risk. The standard statistical approaches to assessment of insurability and potential mispricing are enhanced in several aspects involving consideration of model risk. Model risk can arise from model uncertainty and parameter uncertainty. We demonstrate how to quantify the effect of model risk in this analysis by incorporating various robust estimators for key model parameters that apply in both marginal and joint cyber risk loss process modelling. Through this analysis we are able to address the question that, to the best of our knowledge, no other study has investigated in the context of cyber risk: is model risk present in cyber risk data, and how does is it translate into premium mispricing' We believe our findings should complement existing studies seeking to explore the insurability of cyber losses.
PubDate: 2023-03-18
DOI: 10.1057/s41288-023-00285-x
-
- How cyber insurance influences the ransomware payment decision: theory and
evidence-
Free pre-print version: Loading...Rate this result: What is this?Please help us test our new pre-print finding feature by giving the pre-print link a rating.
A 5 star rating indicates the linked pre-print has the exact same content as the published article.
Abstract: In this paper, we analyse how cyber insurance influences the cost–benefit decision-making process of a ransomware victim. Specifically, we ask whether organisations with cyber insurance are more likely to pay a ransom than non-insureds. We propose a game-theoretic framework with which to categorise and distinguish different channels through which insurance may influence victim decision making. This allows us to identify ways in which insurance may incentivise or disincentivise payment of the ransom. Our framework is informed by data from semi-structured interviews with 65 professionals with expertise in cyber insurance, cybersecurity and/or ransomware, as well as data from the U.K. Cyber Security Breaches Survey. We find that perceptions are divided on whether victims with insurance are more (or less) likely to pay a ransom. Our model can reconcile these views once we take into account context specifics, such as the severity of the attack as measured by business interruption and restoration and/or the exfiltration of sensitive data.
PubDate: 2023-03-09
DOI: 10.1057/s41288-023-00288-8
-
- What is the potential of compensation funds for addressing COVID-related
personal injury'-
Free pre-print version: Loading...Rate this result: What is this?Please help us test our new pre-print finding feature by giving the pre-print link a rating.
A 5 star rating indicates the linked pre-print has the exact same content as the published article.
Abstract: The COVID-19 pandemic continues to present new challenges at the frontiers of social risk. Its significant societal impact has prompted the consideration of alternative frameworks like compensation funds to better allocate the risks and impacts of COVID-related injury. Although there has been discussion about the potential of alternative liability structures for vaccine-related injury, there has been less analysis of the right way to compensate other types of injury, such as long-term illness, disability and death, associated with the SARS-CoV-2 virus. In France, a universal compensation fund for COVID-19-related injuries, designed similarly to asbestos-related schemes, was considered by the parliament. With an eye on scientific knowledge of the best practice in the development and operation of compensation frameworks, this paper analyses the design of such funds in Europe as applied to COVID-19 injury and considers the position of compensation funds in relation to tort law, private insurance and social security models.
PubDate: 2023-02-27
DOI: 10.1057/s41288-023-00292-y
-
- Reinsuring pandemics: the role of government and public–private
partnerships between reinsurers and governments-
Free pre-print version: Loading...Rate this result: What is this?Please help us test our new pre-print finding feature by giving the pre-print link a rating.
A 5 star rating indicates the linked pre-print has the exact same content as the published article.
Abstract: Pandemic-related business interruption (BI) losses are generally considered ‘uninsurable’ because, in order to pool sufficient premium revenue to meet valid claims, premiums would be unaffordable for the majority of policyholders. This paper explores whether and how such losses might be made insurable in the U.K. The authors consider post-pandemic governmental responses, including the role of the Financial Conduct Authority (FCA) and the meaning and implications of FCA v Arch Insurance (U.K.) Ltd ([2021] UKSC 1). The central premise of the paper is to highlight the importance of reinsurance in increasing an underwriter’s insuring capacity and to illustrate how, with the support of government in the form of a public–private partnership (PPP), ‘uninsurable’ risks of this type may be made insurable. The authors propose a PPP, ‘Pandemic Business Interruption Re’, which provides, in their view, a feasible and defensible solution that would confer the benefit of increasing policyholders' faith in the industry's ability to underwrite pandemic-related BI claims and reduce reliance on ex post government aid.
PubDate: 2023-02-17
DOI: 10.1057/s41288-023-00290-0
-
- Technology investments and firm performance under the wave of InsurTech
-
Free pre-print version: Loading...Rate this result: What is this?Please help us test our new pre-print finding feature by giving the pre-print link a rating.
A 5 star rating indicates the linked pre-print has the exact same content as the published article.
Abstract: This study explores how the technology investments of a sample of U.S. property-liability insurers affected their performance during the InsurTech wave. The critical question is whether insurers' InsurTech-oriented investments strengthen their competitive advantages, resulting in improved firm performance. This study reveals that insurers' InsurTech-oriented investments have a significant detrimental influence on their short-term performance. Intriguingly, empirical findings indicate that insurers' InsurTech-oriented investments have a strong positive relationship with long-term performance, suggesting that the notion of time lag and cumulative impacts is justified. The study provides new insight into the effect insurers' InsurTech-oriented investments have on their performance.
PubDate: 2023-02-11
DOI: 10.1057/s41288-023-00286-w
-
- Coordination of cybersecurity risk management in the U.K. insurance sector
-
Free pre-print version: Loading...Rate this result: What is this?Please help us test our new pre-print finding feature by giving the pre-print link a rating.
A 5 star rating indicates the linked pre-print has the exact same content as the published article.
Abstract: The increasing threat of cyberattacks has resulted in increased efforts by both the U.K. government and regulatory authorities to coordinate efforts to influence cybersecurity risk management practices in the U.K. insurance sector, focusing on cyber risk underwriters. This paper provides an evaluation of these arrangements. It first provides a descriptive overview of the key U.K. regulatory authorities and the evolution of their efforts over the past decade, as well as the scope for broader collaborations with industry and member-based associations and international organisations. It then evaluates the effectiveness of these efforts by providing a multi-method study of the incidence, nature and evolution of cost of data breaches, investment in computer systems and software intangible assets at risk of cyberattack, and a content analysis of annual reports of both U.K. regulators and a sample of U.K. insurers. The findings suggest that while both the total costs of data breaches and the size of investment in computer systems and software intangibles at risk of cyberattack have gradually increased over time, the degree of engagement with cyber as a reporting issue by both cyber insurers and financial regulators has not. It is concluded that while these efforts have been apparently successful in avoiding a large-scale, systemic cyberattack on the U.K. insurance industry, there are significant gaps and overlaps in the system of cyber regulatory oversight.
PubDate: 2023-02-10
DOI: 10.1057/s41288-023-00287-9
-
