Contingent Losses Research Articles

Problems and Prospects of Social Insurance in India

The fair transfer of the risk of loss from one entity to another in exchange for a payment, known as a premium, is what is meant by insurance (NCAER). A type of risk management called insurance is used to protect or hedge against the possibility of an unforeseen and contingent loss. In the economy, the insurance industry serves as a risk manager, investment activity booster, financial market stabilizer, mobilizer of funds, and financial middleman. According to the Financial Stability Forum, insurance services are categorized into three major categories: social insurance, non-social insurance and reinsurance. The social insurance sector helps in providing risk cover, investment and tax planning for individuals; the non-social insurance industry provides a risk cover for assets. Under reinsurance, developing countries often find themselves in the position of being buyers of reinsurance (UNCTAD 2007). The development of the social insurance market is playing an increasingly substantial role within the insurance industry due to the existence of insurance-growth relationship with the increased share of the insurance sector in the financial sector (Beck and Webb, 2003). Social insurance is civilization’s partial solution to the problems that caused by death; which eliminates 'risk', substituting certainty for uncertainty and comes to the timely aid of the family in the unfortunate event of death of breadwinner. In short, social insurance is concerned with two hazards that stand across the life-path of every person: firstly, that of dying prematurely is leaving a dependent family to fend for itself, and secondly, that of living till old age without visible means of supports (LIC, website). A well-developed social insurance sector is a boon for economic development as it provides long term funds for infrastructure development at the same time strengthening the risk taking ability of a country. Social insurers are custodians and managers of substantial investments of individuals; and policy holders need to be confident that their insurer will be able to meet its promised liabilities in the event that claims are made under a policy Regulatory authorities therefore seek to ensure that the financial soundness and performance of social insurance companies is in sound condition. Insurance is a big opportunity in a country like India with a large population and 2 untapped potential. In this current scenario of growing customer base, one of the principal concerns underlying the regulation of the insurance companies is the need to protect the interest of and secure fair treatment to policyholders (Charumathi, 2011) The risk absorption role of insurers promotes financial stability in the financial markets and provides a “sense of peace” to economic entities. The business world without insurance is unsustainable since risky business may not have the capacity to retain all kinds of risks in this ever changing and uncertain global economy (Ahmed et al., 2010). Insurance companies’ ability to continue to cover risk in the economy hinges on their capacity to create profit or value for their shareholders. The economic significance and recently increasing importance of the insurance industry for financial stability requires for adoption of risk-based supervisions of its undertakings. The Insurance Regulatory and Development Authority (IRDA), the regulatory body of the Indian insurance industry, has therefore intensified its supervision, on-site examinations and off-site surveillances. All of these regulatory measures are to ensure that the financial performance of insurance companies is in sound condition. Insurers’ financial performance is influenced by both internal and external factors. Whereas internal factors focus on an insurer’s-specific characteristics, the external factors concern both industry features and macroeconomic variables. The performance of insurance companies can also be appraised at the micro, meso and macro levels of the economy. The micro level refers to how firm-specific factors such as size, capital, efficiency, age, and ownership structure affect financial performance. The meso and macro levels refer to the influence of support-institutions and macroeconomic factors respectively. At the micro level, profit is the essential pre-requisite for the survival, growth and competitiveness of insurance firms and the cheapest source of funds (Buyinza et al., 2010). Without profits no insurer can attract outside capital to meet its set objectives in this ever changing and competitive globalized environment.

Penalizing Shirking in Discovering Unsuitability

Abstract We study the optimal penalty scheme for an expert firm and a layman client against shirking in their costly interaction that helps the firm discover the unsuitable transaction, i.e. one that yields a loss for the client. The market solution to the bilateral hidden action problem fails to incentivize sufficient effort and leads to an inefficient outcome, which creates scope for government action. By contrast, private contracts obtain efficiency in an alternative framework with just the firm’s unilateral effort, highlighting the role of the client’s effort in rationalizing legal intervention. Under the unique first-best policy, the firm not only refunds the client but also pays the client’s loss to the government if the firm fails to stop a transaction that ends up being unsuitable. The client receives the refund but submits the firm’s production cost to the government. The optimal punitive penalty is their total contingent loss and is robust to private contracts. The optimal penalty generalizes to a multi-agent team by making each agent internalize all others’ contingent losses.

Role of NPA Provisions in Financial Soundness and Profitability: A study on Primary Co-operative Agricultural and Rural Development Banks in Kollam District, Kerala

Primary Co-operative Agricultural and Rural Development Banks (PCARDBs) means a society has an area of operation confined to a taluk and the principal object of which is to provide long-term credit for agricultural and rural development. One of the dangerous problems faced by co-operative banking is the inability of the borrower to repay their overdue interest and principal, leading to Non-performing Assets (NPA). The presence of NPA had an adverse effect on the profitability and existence of PCARDBs, but they are still surviving with the help of provisions created against NPA. Provisioning means the portion of income set aside by the bank to meet contingent losses that may arise in the event of non-recovery of loans. By analysing the data collected from the financial statements of the six PCARDBs in Kollam district, it can be understood that the growth in NPA involves the necessity of provisions which bring down the overall profitability of the bank. But if the banks are capable to create such provisions from net profit, it helps to maintain the financial soundness of banks. The study is based on the data collected from financial statements of six PCARDBs in Kollam District and the results show higher provisioning for overdue which results net loss in the financial statements of banks

Fiscal commitment and sovereign default risk

This paper studies the interaction between fiscal commitment and sovereign default risk in a model with optimal taxation and government spending. A time-inconsistency problem arises in our framework as the government cannot credibly commit to its future tax policies. As a result, it chooses suboptimally low fiscal adjustments and defaults too frequently. Introducing a commitment device to future tax policies can mitigate this time-inconsistency problem and improve the government's borrowing opportunities. However, such a commitment device also entails a loss of tax contingency that might be costly. Our quantitative analysis shows that committing to an inflexible tax plan is counterproductive: the lack of contingency hurts the government's debt sustainability and reduces welfare. In contrast, committing to a flexible tax plan that is contingent on future economic conditions can improve debt sustainability by 53.3% and result in a significant welfare gain.

The scale and scope of corporate litigation exposure and the factors that explain contingent loss disclosures

We collect a sample of 75,421 lawsuits filed against 90,255 public company defendants from 2006 through 2016 using federal district court docket information. These lawsuits involve an array of allegations, including product liability, civil rights discrimination, improper compensation and labor practices, antitrust violations, pollution, trademark and copyright violations, and patent infringement. The vast majority of these lawsuits likely do not make it onto the radar of investors: only 3% of lawsuit-defendants disclose the pending litigation at any point, with disclosure by plaintiffs and fellow defendants increasing the overall rate of disclosure to 6%. If disclosed, the decision to do so typically occurs early in the legal process, suggesting that the type of claim and the circumstances surrounding its filing—as opposed to how the lawsuit unfolds over time—drive the decision to disclose. Prior SEC scrutiny, the desire to hide potential losses that may make existing debt look particularly risky, and incentives to shape the narrative relative to other available lawsuit information factor into firms’ disclosure decisions. We also find that increased contingency-related concerns expressed in SEC comment letters coincided with the FASB’s consideration of loss contingencies in the 2008 to 2012 timeframe. Yet, the rate of disclosure (particularly of losses) declined over our sample period. Overall, our findings inform the debate about contingency disclosure standards and enforcement. In so doing, our study offers researchers a measure of overarching legal exposure that allows for the study of litigation risk, as well as firm risk more broadly, from new and increasingly relevant perspectives.

The study on risk avoidance of transaction default based on the herding effect

There is a widespread phenomenon of trading goods ordered in advance in the commodity market, and consumers choose to imitate others for security reasons, to form a herd phenomenon of following the trend and following the crowd, this has become an important source of default by commodity booking party in transactions, causing a contingent loss to the producer of the goods. In this paper, the influence of the consumer herding effect is introduced into the characterization of default risk transmission, the herding conduction index is added to the intensity-based model of circular default, it makes the description of default risk more in line with the process of outbreak, aggregation and regression of actual risk. With the help of the credit default swap trading mechanism, the cost model of transaction default risk avoidance protocol is given. The simulation results of the model show that the herding effect has an important impact on the default probability of commodity booking party in transactions, it also makes the cost of default risk avoidance have a corresponding direction of change.

Дистанционная любовь или обучение графическим дисциплинам в условиях пандемии

In this paper it is noted that a characteristic and most important feature of domestic education is close interaction of teacher and student, mentoring, the dominant formula: first love, and then teach. It is feared that the teacher-student personal interaction is lost with the introduction of a graduated training system, dominance of all kinds of testing, and development of distance education technologies.
 At the same time it is noted, that distance education technologies are good for distance learning and self-training, however, they do not contribute to the training of basic, elite specialists. The noted factors give no way to pay due attention to the training of talented students-intellectuals. They are nervous about the popular belief that vast arrays of high intelligence are merely useless for today's society and economy.
 The results of work in the distance learning conditions at the BSTU "VOENMEKH" chair for graphic training of future specialists in the defense industry’s area are analyzed in this paper. It contains also information on adjustments for the educational process, communication features, and evaluation criteria. The conclusion has been drawn that significant difficulties and contingent losses are associated with the loss of possibility for close teacher-student personal interaction that has not allowed the teacher to show proper love for the student.
 The assumption that the most of students are unbred to effective independent work was confirmed. The best adapted to this situation were those former scholars who were taught in an environment that allows them to receive electives of engineering profile or special courses.
 The percentage of students who has not started the distance education or has not coped with it is about 35%, which significantly exceeds the losses of previous years for the same period. At the same time it is noted that past losses were actually determined from the very beginning of training. The current losses have an onset coinciding with the pandemic onset. These data confirm doubts about students' commitment to distance learning.

Insurance-By-Credit

This paper introduces a new insurance paradigm, called insurance-by-credit (hence IBC), that is based on the idea of running insurance on deficit. We believe that IBC can better cope with the macro-level risks such as the COVID-19 outbreak, compared with the standard insurances. As we will discuss, the standard insurance approach towards risk is an ex-ante approach, meaning that by primarily setting the premiums at the present, it is planning to compensate for the uncertain or contingent losses in the future. The new risk management paradigm is motivated by the state policies such as the fiscal and monetary policies, to introduce an ex-post risk management tool. This means that risk management is happening after the damage is observed or started to be observed. This will give rise to a new concept, contingent premium, and introduces a new risk to the insurance industry, the credit risk.We compare an IBC product with a standard insurance product in a simple risk management framework to cover the risk of income loss. For the comparison, we use five quantitative indicators including three economic and two decision-making indicators, in addition to one qualitative indicator, which is the moral hazard risk.As we will discuss, due to fact that an insurance market with systemic risk coverage is an example of the market failure, for any insurance covering systemic risk, the government must be the entity that offers such products. For insurance covering systemic risk, IBC outperforms a standard insurance contract in the indicators that have more priority for the government.

Auditor Experience and the Timeliness of Litigation Loss Contingency Disclosures*

ABSTRACTThis paper hypothesizes and finds that firms audited by city‐industry specialists have more timely disclosures of contingent losses from litigation when there is no news coverage relating to the legal case prior to management disclosures. A closer examination reveals that this result is explained by the specialist auditors’ prior experience auditing clients in the same office and industry who are involved with litigation. In our setting, disclosures of litigation‐related contingent losses, we identify two kinds of knowledge generated from experience: industry knowledge and litigation knowledge. Industry knowledge helps auditors detect and correct poor implementation of guidance for litigation loss contingency disclosures. Auditors gain litigation knowledge from auditing clients in a given office and industry with previous involvement as defendants. Thus, the two types of knowledge interact in their effects on reporting outcomes.

Fiscal Commitment and Sovereign Default Risk

This paper studies the interaction between fiscal commitment and sovereign default risk in a model with optimal taxation and government spending. A time-inconsistency problem arises in our framework as the government cannot credibly commit to its future tax policies. As a result, it chooses suboptimally low fiscal adjustments and defaults too frequently. Introducing a commitment device to future tax policies can mitigate this time-inconsistency problem and improve the government's borrowing opportunities. However, such a commitment device also entails a loss of tax contingency that might be costly. Our quantitative analysis shows that committing to an inflexible tax plan is counterproductive: the lack of contingency hurts the government's debt sustainability and reduces welfare. In contrast, committing to a flexible tax plan that is contingent on future economic conditions can improve debt sustainability by 53.3% and result in a significant welfare gain.

Factors Determining Profitability of the Insurance Industry of Bangladesh

Insurance is a form of risk management, used to hedge against the risk of a contingent loss. It involves the transfer of the risk of potential loss from one entity to another, in exchange for a risk premium. Insurance sector plays an important role in service based economy of both developed and developing markets. The purpose of this research is to analyze the determinants that serve as significant predictors of non-life insurance firms’ profitability in Bangladesh. It analyzes panel data of eight different insurance companies—selected using convenience sampling method from the years 2004-2014 to assess whether any significant relationship exists between Profitability (ROA), and certain independent variables- Underwriting Risk, Expense Ratio, Solvency Margin, Premium Growth, Asset Growth, and Company Size using an Ordinary least squares (OLS) regression model. This paper found significant inverse relationship between Underwriting Risk, and Size, with Profitability (ROA). There is also a significant positive relationship between Expense Ratio, Solvency Margin, and Growth, with the Profitability (ROA). This study will help financial managers to understand which internal factors to focus on, in order to achieve greater profitability, thus maximizing the market value of the respective insurance company.

Menace of Frauds in the Indian Banking Industry: An Empirical Study

Banks are the engines that drive the operations in the financial sector and growth of an economy. With the growing banking industry in India, frauds in Banks are also increasing and fraudsters are becoming more sophisticated and ingenious. While it is not possible for Banks to operate in a zero fraud environment, proactive steps such as conducting risk assessments of procedures and policies can help them hedge their risk of contingent losses due to fraud. Thus, time has come when the security aspects of the Banks have to be dealt with on a priority basis. As part of the study, a questionnaire-based survey was conducted in 2012-13 among 345 Bank employees “to know their perception towards bank frauds and evaluate the factors that influence the degree of their compliance level.” This study reveals that “there are poor employment practices and lack of effective employee training; usually over-burdened staff, weak internal control systems, and low compliance levels on the part of Bank Managers, Offices and Clerks. However, technology can play a major part in combating new-age frauds: proactive forensic data analysis and data mining techniques can help governments, regulatory bodies and Banks to counter the increasingly complex nature of frauds.

The axioms of modernity and the loss of contingency: Rethinking the non-modern thought of Ivan Illich

The axioms of modernity and the loss of contingency: Rethinking the non-modern thought of Ivan Illich

MENACE OF FRAUDS IN THE INDIAN BANKING INDUSTRY: An Empirical Study

Banks are the engines that drive the operations in the financial sector and growth of an economy. With the growing banking industry in India, frauds in Banks are also increasing and fraudsters are becoming more sophisticated and ingenious. While it is not possible for Banks to operate in a zero fraud environment, proactive steps such as conducting risk assessments of procedures and policies can help them hedge their risk of contingent losses due to fraud. Thus, time has come when the security aspects of the Banks have to be dealt with on a priority basis. As part of the study, a questionnaire-based survey was conducted in 2012-13 among 345 Bank employees “to know their perception towards bank frauds and evaluate the factors that influence the degree of their compliance level.” This study reveals that “there are poor employment practices and lack of effective employee training; usually over-burdened staff, weak internal control systems, and low compliance levels on the part of Bank Managers, Offices and Clerks. However, technology can play a major part in combating new-age frauds: proactive forensic data analysis and data mining techniques can help governments, regulatory bodies and Banks to counter the increasingly complex nature of frauds.

La perte de contingence : un concept phénoménologique renseignant les modèles cognitifs du délire de type paranoïaque

ObjectivesWhen researching delusions, cognitive sciences have developed certain models involving philosophy, psychology and neuroscience but these mainly focus on a monothematic delusion (such as the Capgras syndrome) and schizophrenia. Paranoia is a princeps clinical entity in the psychopathological tradition of psychoses. Persecutory delusion has recently been the subject of specific studies focusing on attention and cognitive models, whether general or specific (Bentall, Freeman), and isolating a number of factors. We propose to analyze the pertinence of these models in order to test their fruitfulness. We have attempted to put data from cognitive sciences and clinical knowledge in order. MethodA review underscores the cognitive approach to persecutory delusion. On the one hand, general or specific models are available, on the other, several cognitive mechanisms are thought to be impaired. Moreover, in accordance with an interdisciplinary view, we propose to bring the philosophical concept of contingency into the cognitive psychology of paranoia. According to Minkowski, loss of contingency is hypothesized to be the fundamental disorder concerning “being in the world” of paranoia. ResultsThree main models attempt to explain delusion: firstly, top-down account that considers delusion as a high order defect; secondly, bottom-up account where the first problem comes from experience; thirdly, a mixed model which associates low and high order levels. This splitting between percept and intellect is not very interesting for paranoia. Elsewhere, specific models place paranoia as a way of defense against depression (Bentall) and paranoia as directly reflecting anxiety (Freeman). According to these points of view, paranoia is not a specific disorder. On the contrary, loss of contingency as the primary disturbance enables us to specify paranoia. With this in mind, attribution's style is strained, the theory of mind is hypertrophied and social and emotional perception disorders are understood and, likewise, reasoning biases (jumping-to-conclusion, need to closure) highlight a kind of irrationality. DiscussionTraditionally, research in cognitive sciences is interdisciplinary. By integrating a concept derived from phenomenology and clinical tradition, we gain in fruitfulness. In fact, specific models that are actually available rely on ideas stemming from affective psychopathology: depression and anxiety. If you grasp paranoia as a specific phenomenon according to the history of psychiatry, you can propose a model more fitting to clinical reality. Nevertheless, loss of contingency does not fit all experimental data. We notice that some data are partially conflicting and patch worked. A challenge remains to define paranoia well: the actual definition, according to the DSM IV-TR, is too restricted. Indeed, paranoia is not only persecutory delusion. Moreover, interpretation and systematization are critical concepts when targeting paranoia outside of the field of schizophrenia. ConclusionLoss of contingency is therefore a heuristic hypothesis which best explains most data and provides a new perspective to orient future cognitive experimental research, especially in the field of virtual reality. The clinical features of paranoia are highly suitable for cognitive studies in order to improve accounts.

Auditor Industry Expertise and the Timeliness and Usefulness of Litigation Loss Contingency Disclosures

This paper hypothesizes and finds that firms audited by city-level industry specialists have more timely and useful disclosures of contingent losses from litigation, a result which we show is explained by the specialist auditor’s prior experience with other clients in the same industry. A closer examination reveals that auditor quality plays no role if prior disclosures exist in other disclosure channels. In addition, firms audited by city specialists are more likely to make a litigation loss accrual even if they face meet-or-beat pressures.Investors have complained for many years that public companies fail to warn them early enough, or at all, about risks relating to litigation and other claims that ultimately result in large losses. In response to these criticisms, the FASB proposed two exposure drafts in its unsuccessful attempts to improve the timeliness and usefulness of loss contingency disclosures. The SEC has now confronted the issue and is currently seeking ways to enforce greater compliance with SFAS 5 disclosure requirements. Thus, our evidence informs the ongoing regulatory debate surrounding SFAS 5 and potentially enhances the regulatory oversight strategies of the SEC and PCAOB.

On the valuation of reverse mortgages with regular tenure payments

For the valuation of reverse mortgages with tenure payments, this article proposes a specific analytic valuation framework with mortality risk, interest rate risk, and housing price risk that helps determine fair premiums when the present value of premiums equals the present value of contingent losses. The analytic valuation of reverse mortgages with tenure payments is more complex than the valuation with a lump sum payment. This study therefore proposes a dimension reduction technique to achieve a closed-form solution for reverse annuity mortgage insurance, conditional on the evolution of interest rates. The technique provides strong accuracy, offering important implications for lenders and insurers.

Toward a comprehensive functional analysis of depressive behavior: Five environmental factors and a possible sixth and seventh.

In the 1990's, a resurgence of interest in behavioral theories of depression occurred. This resurgence derived from the establishment of clinical behavior analysis as a vibrant adjunct to applied behavior analysis (Dougher, 1993; 1994; 2000) with active theoretical and empirical investigations and treatment developments relevant to outpatient psychotherapeutic treatment of depression. In addition, a component analysis of cognitive-behavior therapy for depression showed that the behavioral component (behavioral activity scheduling was referred to as behavioral activation) was sufficient to explain recovery from initial depression (Jacobson et al., 1996) and at follow up (Gortner, Gollan, Dobson, & Jacobson, 1998). The cognitive component of treatment appeared to add little to the overall outcome. These findings renewed interest in behavioral approaches to depression treatment (Hollon, 2001; Jacobson & Gortner, 2000) and sparked development of a complete Behavioral Activation approach (Martell, Addis, & Jacobson, 2001; also see Kanter, Callaghan, Landes, Busch, & Brown, 2004). Other clinical behavior analytic approaches to depression have also been evaluated, including Acceptance and Commitment Therapy (Zettle & Hayes, 1986; Zettle & Rains, 1989) and Functional Analytic Psychotherapy (Kanter, Schildcrout, & Kohlenberg, in press; Kohlenberg, Kanter, Bolling, Parker, & Tsai, 2002). The above sets the stage for a re-analysis of behavioral theories of depressive behavior (e.g., Bolling, Kohlenberg, & Parker, 2000; Dougher & Hackbert, 1994; 2000; Ferster, 1973; Hoberman & Clarke, 1993; Kanter et al., 2004; Lewinsohn, 1974). In review of current behavioral models of depression, we found that several factors were highlighted. First, early models incorporated Skinner's (1953; 1974) stance that feelings such as depression are respondent bi-products of behavior-environment interactions. For example, failure to achieve sleep as a reinforcer for insomniacs might produce depressive symptoms. Subsequent models focused on direct functional aspects of depression. While many of the early pioneers of behavioral approaches to depression became focused on cognitive phenomena after initial investigations, this behavioral work remains an excellent starting point for current theory exploration. In particular these models emphasized depression as a function of positive reinforcement deprivatio n, either in terms of low density of positive reinforcement (Ferster, 1973) or low rates of response-contingent positive reinforcement (Hoberson & Lewinsohn, 1985; Lewinsohn, 1974, 1975). Depression was also conceptualized in terms of aversive control by these early theorists (Ferster, 1973; Grosscup & Lewishon, 1980) and in terms of loss of contingency through punishment (e.g., Seligman, 1975). In these models, deficits in behavior are a function of reinforcement deprivation or punishment, emotional behavior is seen as respondent, and additional behaviors, including thinking and feeling, may be described as adjunctive behavior (schedule induced). Later models viewed depressive behavior as operant phenomenon. As operant phenomenon, depressive behavior is directly subject to and maintained by positive and negative reinforcement (Hops, Sherman & Biglan, 1990). We will then review the theory and research on rule-governed behavior has been used to model depression both in terms of deficits in rule-governed behavior (e.g., Kanfer, 1970, 1971 as played out in Rehm, 1977, 1988) and excessive rule-governed behavior (Hayes, Strosahl, & Wilson, 1999). Finally, the possible role of establishing operations in depression will be explored. This paper will review each of these factors. THE REINFORCEMENT DEPRIVATION MODEL The simple notion that a lack of or reduction in positive reinforcement produces depression has been the foundation of most behavioral theories of depression. …

Experimental study of "Conditional losses" in railway traction lines

The nature of the emergence of losses. An experimental study of conditional loss power to parts of the Odessa railway. Recommendations to reduce contingent losses

Are Revisions to SFAS No. 5 Needed?

SYNOPSIS: In the Financial Accounting Standards Board’s (FASB) project, “Disclosure of Certain Loss Contingencies,” a central issue underlying the debate is whether existing implementation of FASB Accounting Standards Codification Topic 450-20 (previously Statement of Financial Accounting Standards No. 5) provides sufficient and timely information to financial statement users. The Exposure Draft explains that constituents’ assertions of inadequate disclosures are the primary motive underlying the FASB’s re-examination of this issue (see, for example, page v of the Exposure Draft). However, little actual data are available to indicate the extent of the alleged problem. This manuscript presents the results of a study undertaken to provide such data. For a sample of litigation-related losses, we find a surprisingly large incidence of non-disclosure of contingent losses that cannot be readily explained. Moreover, even where there is disclosure, we find many cases where firms do not provide estimates of expected losses, presumably under the permitted exception for cases where firms claim to be unable to estimate the magnitude of expected losses. On the other hand, we find relatively frequent disclosure of the items called for in the Exposure Draft, consistent with the conjecture that at least some of these items are being demanded by users.