Members Academic Journals
Access The Geneva Papers
The impact of health-promoting efforts by older individuals on the design of long-term care insurance: the application of IoT technology
Abstract
‘Internet of Things’ (IoT) devices provide insurance companies with real-time data about insured assets or individuals for more precise risk assessment and underwriting. This study examines the potential premium discounts in long-term care insurance when health and lifestyle habits are monitored as risk factors by IoT devices. Our findings reveal that while both regular exercise and good sleep quality reduce the probability of long-term care needs, regular health checks do not. We further construct a heath transition model and identify premium discounts based on data collected by IoT technologies. Using actual panel data in Taiwan, our research suggests that individuals aged 55 years old may be eligible for premium discounts of more than 10%, implying that IoT technologies enable insurance companies to provide customised insurance policies and pricing structures tailored to individual risk profiles and behaviour. Our results contribute to the InsurTech design of long-term care insurance products and provide suggestions for insurance companies and financial authorities.
Internalising externality: the impact of environmental pollution liability insurance on the green transformation of Chinese heavy-polluting firms
Abstract
Environmental protection and green development have become a common goal for countries and organisations worldwide, increasing pressure on firms to implement green transformation (GT) strategies. Environmental pollution liability insurance (EPLI) is a powerful risk management tool that transfers pollution liability risks outside the firm. This study examines the impact of EPLI coverage on firms’ GT progress using data from Chinese heavy-polluting firms. The empirical results show that EPLI-covered firms are likely to promote GT, with the effect persisting over time. The study then discusses the potential mechanisms to explain this positive impact and finds that EPLI imposes additional compliance costs on firms. However, these additional compliance costs do not exacerbate firms’ financial constraints because EPLI coverage improves the availability of external financing. EPLI corverage also improves firms' risk management practices. Finally, the magnitude of EPLI’s impact depends on firms’ bargaining power in their relationship with the local government.
Discretionary decisions in capital requirements under Solvency II
Abstract
European insurers are allowed to make discretionary decisions in the calculation of Solvency II capital requirements. These choices include the design of risk models (ranging from a standard formula to a full internal model) and the use of long-term guarantees measures. This article examines the situation of insurers that utilize the discretionary scope regarding capital requirements for market risks. In a first step of our analysis, we assess the risk profiles of 49 stock insurers using daily market data. In a second step, we exploit hand-collected Solvency II data for the years 2016 to 2020. We find that long-term guarantees measures substantially influence the reported solvency ratios. The measures are chosen particularly by less solvent insurers and those with high interest rate and sovereign credit risk sensitivities. Internal models are used more frequently by large insurers and especially for market risks for which they have already found adequate immunization strategies.
Access The Geneva Review
The role of normative analysis in markets with hidden knowledge and hidden actions
Abstract
When examining the economic impact of a change in policy regime, one may elect to conduct a positive analysis that considers the effect of such a policy change on the allocations supported as a market equilibrium. An alternative approach would be to perform a normative analysis that examines the effect of the regime change on the set of Pareto optimal allocations in the economy. In settings where the Fundamental Welfare Theorems hold, the isomorphism between equilibrium and Pareto efficient allocations implies that the choice of approach is largely a matter of convenience. When this isomorphism fails to hold, as in settings with hidden information or hidden actions, the equilibrium allocations may not be efficient so that a normative analysis of the alternative efficiency frontiers is required to determine whether the policy change is desirable in the sense of permitting potential Pareto improvements. If so, then an equilibrium analysis may be used to determine the extent to which such improvements may be realized by market participants.
The tontine and the public sphere: Ireland and Scotland compared, 1772–1850
Abstract
Recently, there has been a surge of interest in tontines, including their history and potential modern applications. While scholarly work has focussed on how tontines were organised, nominee selection, and the use of raised funds, little attention has been paid to their cultural impact. This article starts to address this gap by comparing tontine development in Ireland and Scotland, where the scheme was more than a revenue-raising tool. In these countries, it contributed to the public sphere through broad public discourse in newspapers and pamphlets and by raising funds for spaces including meeting rooms, coffeehouses, theatres, and hotels. The tontine’s influence in these regions therefore extended beyond the financial.
Can an actuarially unfair tontine be optimal?
Abstract
A one-period tontine is a collective investment fund in which every participant enters with an initial contribution, but only those participants who are still alive at maturity are entitled to receive a share of the total fund value. A vast literature proposes various sharing rules, primarily using actuarial fairness of the payout as the main criterion, i.e., the sharing is structured in a way that participants have the same (unconditional) expected return. We revisit this point and suggest alternative sharing rules aimed at better suiting investors. Specifically, we discuss how to share mortality risk using equality in expected utility among participants as our fairness criterion. A key finding is that, in a competitive market, only actuarially fair tontines are viable.