Multiple Peril Research Articles

Risk Preferences and the Adoption of Subsidised Crop Insurance: Evidence from Lithuania

Crop insurance adoption remains low among small and medium farms – despite financial public support in the form of premium subsidies. A better understanding of smaller farmers’ insurance decisions and contract attribute preferences is thus needed to encourage insurance solutions. Moreover, previous research has primarily examined risk preferences and insurance adoption among Western European farmers, while little is known about insurance markets and risk preferences in Central and Eastern European countries. We contribute to the literature by i) contrasting the current status of insurance adoption by Lithuanian farmers by farm size, ii) assessing farmers’ risk preferences and attitudes towards crop insurance, and iii) investigating small and medium farmers’ preferences for the characteristics of a new (hypothetical) subsidised multiple peril crop insurance (MPCI) product. Therefore, we conduct a socio-economic survey in Lithuania that features a risk preference elicitation task and a discrete choice experiment (DCE). Findings show that, on average, sampled farmers are risk-neutral to slightly risk-seeking and that insurance adoption is lowest among smaller farms (<50 hectares). Moreover, insurance adoption was associated with higher risk exposure, higher trust in insurance services, and higher willingness to take farming-specific risks on all farms. For small and medium farms, the DCE results suggest preference heterogeneity for contract attributes and higher adoption rates when contract design reduces the risks and efforts associated with subsidised insurance.

Multi-peril frequency credibility premium via shared random effects

It is not uncommon to observe that an insurance policy consists of multiple coverages which cover different perils. In order to capture possible dependence among the claims from multiple coverages and reflect it in a posteriori ratemaking for property and casualty insurance, a shared random effects model is proposed in this article which not only captures the unobserved heterogeneity in risks but also induces natural dependence structure among the claims from multiple perils. The proposed model has a nice interpretation and comes with closed forms of joint likelihood and credibility premium which are desirable for ease of implementation in practice. Both the proposed and naive methods are calibrated using a public insurance dataset provided by Wisconsin Local Government Property Insurance Fund, where one can observe both policy characteristics and historical claims information and it turns out that the proposed method outperforms the methods which are industry benchmarks in terms of out-of-sample validation.

Multi-peril risk assessment for business downtime of industrial facilities

The losses incurred by industrial facilities following catastrophic events can be broadly broken down into property damage and business interruption due to the ensuing downtime. This article describes a generalized probabilistic methodology for estimating facility downtime under multi-hazard scenarios. Since the vulnerability of each components of an industrial facility varies with the types of hazard, it is beneficial to adopt a system-of-systems approach for analyzing such complex facilities under multiple interdependent hazards. In this approach, the complex layout of the facility is first broken down into its constituent components. The component vulnerabilities to different hazards are combined using Boolean logic, assuming their repair time as a common basis for defining damage states of the component. This combination results in multi-hazard fragility functions for each component of the system, which give the probability of damage under combined occurrence of multiple perils. The time to repair a component is expressed probabilistically using restoration functions. Using fault tree analysis, the components’ fragility functions and restoration functions are propagated to calculate system-level downtime. We demonstrate the methodology on a case-study power plant to estimate downtime risk under combined earthquake and tsunami hazard.

Index and multirisque insurance products in agriculture: perspectives of development

The article discusses current trends in the development of insurance market in agriculture with the use of the index in both developed and developing countries. The analysis of the main insurance products based on the index, presented their advantages over writing multiple peril crop insurance and possible brake factors when projecting into domestic practice.

Advantageous Selection in Crop Insurance: Theory and Evidence

AbstractWe extend the recently proposed multi‐dimensional asymmetric information model to show that advantageous selection could be present in crop insurance with two types of coverage: (i) multiple perils (e.g. a multi‐peril, ‘all risk’ policy), and (ii) a specific named peril (or set of perils). Our theoretical model suggests that certain characteristics of an insured farmer (or farm) under both types of coverage can be sources of advantageous selection. Farmers who advantageously select are more likely to purchase insurance coverage and less likely to realise a loss. A supplementary empirical analysis, based on data from the Philippine crop insurance market, illustrates how sources of advantageous selection can be identified econometrically.

Securitizing Area Insurance: A Risk Management Approach

This paper examines the possibility of developing a risk management instrument by designing a financial security whose value is linked to the average revenue of a given area. This type of program is sufficiently general to be considered for any group of businesses that face production uncertainty. In agriculture, it has been proposed as an alternative to multiple peril crop insurance programs, as area yield, revenue or rainfall insurance in order to eliminate ex ante and ex post moral hazard. While most of the literature concentrates on the determination of value of the indemnity and the payment of such an insurance, this paper focuses on the fact that, unlike other forms of insurance, area insurance can be cast in the form of a hedging security and, as a consequence, rather than depending only on the demand for diversification (the beta of the Capital Asset Price Model), it makes possible a risk shifting strategy based on the heterogeneity of risk attitudes of the economic agents operating in a given area.

Securitizing Area Insurance: A Risk Management Approach

This paper examines the possibility of developing a risk management instrument by designing a financial security whose value is linked to the average revenue of a given area. This type of program is sufficiently general to be considered for any group of businesses that face production uncertainty. In agriculture, it has been proposed as an alternative to multiple peril crop insurance programs, as area yield, revenue or rainfall insurance in order to eliminate ex ante and ex post moral hazard. While most of the literature concentrates on the determination of value of the indemnity and the payment of such an insurance, this paper focuses on the fact that, unlike other forms of insurance, area insurance can be cast in the form of a hedging security and, as a consequence, rather than depending only on the demand for diversification (the beta of the Capital Asset Price Model), it makes possible a risk shifting strategy based on the heterogeneity of risk attitudes of the economic agents operating in a given area.

Index Insurance for Developing Countries

AbstractUnlike conventional insurance, which indemnifies policyholders for verifiable production losses arising from multiple perils, index insurance indemnifies policyholders based on the observed value of a specified “index” or some other closely related variable that is highly correlated with losses. Index insurance exhibits lower transaction costs than conventional insurance, potentially making it more affordable to the poor in the developing world. However, it also offers less effective individual risk protection. This article provides a review of recent theoretical and empirical research on index insurance for developing countries and summarizes lessons learned from index insurance projects implemented in the developing world since 2000.

Transatlantic Holdings, Inc.

AbstractInsurance (MIC: SIC: 6331 NAIC: 524126)Transatlantic Holdings, through its wholly‐owned subsidiaries Transatlantic Reinsurance Company, Trans Re Zurich and Putnam Reinsurance Company, provides reinsurance capacity for property and casualty products on a treaty and facultative basis, directly and through brokers, to insurance and reinsurance companies, in both the domestic and international markets. As of Dec 31 2007, Co.'s principal lines of reinsurance included ocean marine and aviation, medical malpractice, auto liability (including non‐standard risks), accident and health and surety and credit in the casualty lines, and fire, allied lines, auto physical damage and homeowners multiple peril lines in the property lines.

Chubb Corp.

AbstractInsurance (MIC: SIC: 6331 NAIC: 524126)Chubb is a holding company with subsidiaries mainly engaged in the property and casualty insurance business, which is divided into three business units: Chubb Commercial Insurance, which provides commercial insurance products, including coverage for multiple peril, casualty, workers' compensation and property and marine; Chubb Specialty Insurance, which offers professional liability products for privately and publicly owned companies, financial institutions, professional firms and healthcare organizations; and Chubb Personal Insurance, which provides products for individuals with fine homes and possessions who require more coverage choices and higher limits than standard insurance policies.

Transatlantic Holdings, Inc.

AbstractInsurance (MIC: SIC: 6331 NAIC: 524126)Transatlantic Holdings, through its wholly‐owned subsidiaries Transatlantic Reinsurance Company, Trans Re Zurich and Putnam Reinsurance Company, provides reinsurance capacity for property and casualty products on a treaty and facultative basis, directly and through brokers, to insurance and reinsurance companies, in both the domestic and international markets. As of Dec 31 2007, Co.'s principal lines of reinsurance included ocean marine and aviation, medical malpractice, auto liability (including non‐standard risks), accident and health and surety and credit in the casualty lines, and fire, allied lines, auto physical damage and homeowners multiple peril lines in the property lines.

Chubb Corp.

AbstractInsurance (MIC: SIC: 6331 NAIC: 524126)Chubb is a holding company with subsidiaries mainly engaged in the property and casualty insurance business, which is divided into three business units: Chubb Commercial Insurance, which provides commercial insurance products, including coverage for multiple peril, casualty, workers' compensation and property and marine; Chubb Specialty Insurance, which offers professional liability products for privately and publicly owned companies, financial institutions, professional firms and healthcare organizations; and Chubb Personal Insurance, which provides products for individuals with fine homes and possessions who require more coverage choices and higher limits than standard insurance policies.

Chubb Corp.

AbstractInsurance (MIC: 8.2 SIC: 6331 NAIC: 524126)Chubb is a holding company with subsidiaries principally engaged in the property and casualty insurance business. Chubb Commercial Insurance provides a range of commercial insurance products, including coverage for multiple peril, casualty, workers' compensation and property and marine. Chubb Specialty Insurance provides a range of professional liability products for privately and publicly owned companies, financial institutions, professional firms and healthcare organizations. Chubb Personal Insurance provides products for individuals with fine homes and possessions who require more coverage choices and higher limits than standard insurance policies.

Transatlantic Holdings, Inc.

AbstractInsurance (MIC: 8.2 SIC: 6331 NAIC: 524126)Transatlantic Holdings, through its wholly‐owned subsidiaries Transatlantic Reinsurance Company, Trans Re Zurich and Putnam Reinsurance Company, provides reinsurance capacity for property and casualty products on a treaty and facultative basis, directly and through brokers, to insurance and reinsurance companies, in both the domestic and international markets. As of Dec 31 2007, Co.'s principal lines of reinsurance included ocean marine and aviation, medical malpractice, auto liability (including non‐standard risks), accident and health and surety and credit in the casualty lines, and fire, allied lines, auto physical damage and homeowners multiple peril lines in the property lines.

Chubb Corp.

AbstractInsurance (MIC: 8.2 SIC: 6331 NAIC: 524126)Chubb is a holding company with subsidiaries principally engaged in the property and casualty insurance business. Chubb Commercial Insurance provides a range of commercial customer insurance products, including coverage for multiple peril, casualty, workers' compensation and property and marine. Chubb Specialty Insurance provides a professional liability products for privately and publicly owned companies, financial institutions, professional firms and healthcare organizations. Chubb Personal Insurance provides products for individuals with fine homes and possessions who require more coverage choices and higher limits than standard insurance policies.

Transatlantic Holdings, Inc.

AbstractInsurance (MIC: 8.2 SIC: 6331 NAIC:524126)Transatlantic Holdings, through its wholly‐owned subsidiaries Transatlantic Reinsurance Company, Trans Re Zurich and Putnam Reinsurance Company, provides reinsurance capacity for property and casualty products on a treaty and facultative basis, directly and through brokers, to insurance and reinsurance companies, in both the domestic and international markets. As of Dec 31 2006, Co.'s principal lines of reinsurance included ocean marine and aviation, medical malpractice, auto liability (including non‐standard risks), accident and health and surety and credit in the casualty lines, and fire, allied lines, auto physical damage and homeowners multiple peril lines in the property lines.

Transatlantic Holdings, Inc.

AbstractInsurance (MIC: 8.2 SIC: 6331 NAIC: 524126)Transatlantic Holdings, through its wholly‐owned subsidiaries Transatlantic Reinsurance Company, Trans Re Zurich and Putnam Reinsurance Company, provides reinsurance capacity for property and casualty products on a treaty and facultative basis, directly and through brokers, to insurance and reinsurance companies, in both the domestic and international markets. As of Dec 31 2006, Co.'s principal lines of reinsurance included ocean marine and aviation, medical malpractice, auto liability (including non‐standard risks), accident and health and surety and credit in the casualty lines, and fire, allied lines, auto physical damage and homeowners multiple peril lines in the property lines.

Chubb Corp.

AbstractBusiness Summary: Insurance (MIC: 8.2 SIC: 6331 NAIC: 524126)Chubb is a holding company with subsidiaries principally engaged in the property and casualty insurance business. Chubb Commercial Insurance provides a range of commercial customer insurance products, including coverage for multiple peril, casualty, workers' compensation and property and marine. Chubb Specialty Insurance provides a professional liability products for privately and publicly owned companies, financial institutions, professional firms and healthcare organizations. Chubb Personal Insurance provides products for individuals with fine homes and possessions who require more coverage choices and higher limits than standard insurance policies.

Chubb Corp.

AbstractInsurance (MIC: 8.2 SIC: 6331 NAIC: 524126)Chubb is a holding company with subsidiaries principally engaged in the property and casualty insurance business. Chubb Commercial Insurance provides a range of commercial customer insurance products, including coverage for multiple peril, casualty, workers' compensation and property and marine. Chubb Specialty Insurance provides a professional liability products for privately and publicly owned companies, financial institutions, professional firms and healthcare organizations. Chubb Personal Insurance provides products for individuals with fine homes and possessions who require more coverage choices and higher limits than standard insurance policies.

Transatlantic Holdings, Inc.

AbstractInsurance (MIC: 8.2 SIC: 6331 NAIC: 524126)Transatlantic Holdings, through its wholly‐owned subsidiaries Transatlantic Reinsurance Company, Trans Re Zurich and Putnam Reinsurance Company, provides reinsurance capacity for property and casualty products on a treaty and facultative basis, directly and through brokers, to insurance and reinsurance companies, in both the domestic and international markets. At Dec 31 2006, Co.'s principal lines of reinsurance included ocean marine and aviation, medical malpractice, auto liability (including non‐standard risks), accident and health and surety and credit in the casualty lines, and fire, allied lines, auto physical damage and homeowners multiple peril lines in the property lines.