Risk Reinsurance Research Articles

Underwriting Results, Investment Results and Risk Based Capital on Profit of General Insurance Companies in Indonesia

An insurance business is a business that provides services in risk re-insurance. This study aims to analyze Premium Income, Underwriting Results, Investment Returns and Risk Based Capital on Profits of General Insurance Companies in Indonesia. The method used in this study is documentation techniques through OJK reports and financial reports for 8 insurance companies in Indonesia from 2016 to 2020 so that the population is 40 data. The sampling technique is saturated sampling, where the entire population is taken as a sample, so that the total sample is 40 data. The results of the study show that investment returns and risk based capital have a positive and significant effect on earnings, while premium income and underwriting results have no significant effect on profits.

Mathematical Modeling of the Risk Reinsurance Process

This paper presents a method for assessing financial risks and managing them to optimize the decision-making process. It is shown that the type of economic entity at risk and its activities in the financial market affect the specifics of financial risk management, which can be classified into three main groups: hedging, diversification, and insurance. The main instruments used for this purpose are also identified. Special attention is given to the dynamic properties of financial flows arising from the simulation of artificial financial instruments, as well as to their influence on the results of financial risk management when taking into account errors in estimating parameters of mathematical models. The purpose of our study is to create a mathematical model that can be used to assess the risk reinsurance process. We will create a mathematical model of the risk reinsurance process using the following steps: 1. Identify all of the relevant variables in our analysis. 2. Determine how these variables interact with each other and come to a conclusion about how they influence each other's values. 3. Find equations that represent these relationships between the variables and solve for their values with those equations. 4. Test these models against real data from known cases in order to ensure that they work as expected, then use them for future studies or applications requiring this type of modeling technique.

The problem of risk protection in agriculture of Ukraine

An important specific feature of risk insurance in the agricultural business is the possibility of systemic risks, which are characterized by large amounts of loss-making for agricultural enterprises. In this case, the amount of insurance premiums received by insurers may significantly exceed the amount of their insurance payments. In our opinion, the insurance products offered by Ukrainian insurers in the field of agricultural insurance do not fully meet the needs of consumers. The main problems of Ukrainian insurance organizations providing services in the field of agricultural insurance are the low level of solvency of agricultural enterprises, as well as inflationary processes that make long-term agricultural insurance contracts concluded in the national currency of little demand. The evolutionary development of the Ukrainian insurance market for agricultural risk insurance, in our opinion, should correlate with the development of reinsurance of these risks. This will make it possible to balance the insurance portfolios of insurance companies and provide insurers with additional opportunities for their investment activities. The creation of a specialized national reinsurance company for reinsurance of agricultural risks, in our opinion, will improve the insurance coverage of Ukrainian agricultural enterprises.

A Study on the Influence of Agricultural Insurance on the Upgrading and Optimization of Agricultural Industrial Structure in China-An Empirical Analysis Based on GMM Model of Panel System

This article uses panel data from 2000 to 2019 in the China Insurance Yearbook, China Rural Statistical Yearbook and the National Bureau of Statistics. Based on the system generalized moment estimation model, the influence of the density and depth of agricultural insurance at the regional level on the upgrading and optimization of agricultural industrial structure is studied. The empirical results show that the increase in the depth of agricultural insurance has a significant role in promoting the upgrading of the agricultural industry structure. The increase in the density of agricultural insurance has a certain inhibitory effect on the structure of the agricultural industry. Therefore, it needs to improve the agricultural insurance financial subsidy policy, guide the diversified development of agricultural insurance, and establish an agricultural risk reinsurance mechanism to escort the upgrading and optimization of the agricultural industry structure.

Effect Of Population Size On Rural Health Insurance Premiums In The Federal Employees Health Benefits Program.

In the study of health insurance access and affordability in rural areas, a recurring issue is to understand the challenges that programs based upon the competitive market model, such as the Affordable Care Act's Marketplaces, may experience in less populated areas. This article analyzes data for 2013-16 from the Federal Employees Health Benefits Program, focusing on premium and enrollment data for "state-specific" plans-which offer insurance policies and set premiums at the regional level. In nonmetropolitan counties, each additional plan enrollee was associated with a $0.10 lower per capita biweekly premium, whereas this effect was trivial in metropolitan counties. Low health care provider counts were not associated with higher premiums in nonmetropolitan areas, nor was the degree of insurer competition an important predictor of premiums. However, there was substantial correlation over time, which suggests that some variables may be viewed less as sources of premium variation and more as influencing long-term premium levels. These findings suggest that small risk pools may contribute to the challenges faced by private plans in rural areas, in which case risk reinsurance is a potential policy solution.

The diffusion of complex securities: The case of CAT bonds

Complex securities generally do not diffuse smoothly but by fits and starts in response to sudden shifts in demand, occurring as investors learn about the intrinsic value of the securities from their noisy performance. We use CAT bonds, a capital market-based alternative to CAT risk reinsurance, to illustrate the diffusion of a complex security that competes against a legacy financial product offered by financial intermediaries. We find that the diffusion of the security is highly path-dependent with the capricious ups and downs of its actual performance plus the competitive response of CAT reinsurers jointly determining its ultimate success or failure.

Simulations of Optimizing Strategies for Forming of Mutual Insurance Companies Fund

Mutual insurance companies are subject to high risks of ruin due to lack of funds. Thus, the problem of optimizing strategies for forming the company’s fund are being actualized, ensuring an increase in its financial stability under assumed random insurance payments flow by rationalizing the size of initial and current contributions of its participants, the volume and time parameters of asset securitization, loans taken, insurance risk taxes taking into account the possibility of obtaining subsidies, reinsurance of risks and some other forms of the state support. The criterion in such task is the minimization of probabilities of the company’s ruin. As restrictions costs of policyholders and the state can be considered but those determined by legislation. Because of the random nature of many indicators and the complex relations among them, it is rather difficult to obtain a solution to such optimization problems through analytical methods. For these purposes, simulations are preferred.

Learning and Innovations: The Case of CAT Bonds

Innovative financial securities generally do not diffuse smoothly but by fits and starts in response to sudden shifts in demand, occurring as investors learn about the intrinsic value of the securities from their noisy performance. Concomitantly, from the point of view of issuers, new securities often consist of a capital market-based alternative to legacy financial products offered by financial intermediaries, prompting the latter to engage in a competitive response. We use the development of the CAT bonds, a capital market-based alternative to traditional CAT risk reinsurance, to illustrate these ideas. We find that the process of diffusion of the security is highly path-dependent, with the capricious ups and downs of actual performance determining the success or failure of the process. When CAT reinsurers respond to cat bond penetration by lowering reinsurance rates, the long-term distribution of CAT bond market outcomes shows a tendency for the new security to coexist with CAT reinsurance.

Agricultural Reinsurance Ratemaking: Development of a New Premium Principle

An important topic in agricultural insurance is how to determine the appropriate premium to charge for the risk. While this is fundamental to all types of insurance, in agriculture this is a particularly challenging task given a number of multifaceted factors pertaining to the loss experience data, including scarcity and credibility. The objective of this paper is to formally introduce premium principles to the agricultural insurance and reinsurance literature, with a focus on a new premium principle approach based on the multivariate weighted distribution. The multivariate weighted premium principle (MWPP) reweights historical crop loss experience using auxiliary factors, which may include material information such as economic and market conditions, liabilities, weather, soil, etc., in order to refine the pricing of crop insurance contracts. A unique reinsurance data set covering the period from 2001 to 2011 from the province of Manitoba, Canada is used to empirically evaluate a number of potential premium principles. The results suggest that the MWPP approach produces the most accurate premium rates. In particular, the MWPP redistributes premium rates and assigns increased loadings to higher risk reinsurance contract layers, helping reinsurers manage their reserves and achieve improved sustainability in the long term.

The Uses and Abuses of Finite Risk Reinsurance

Finite risk reinsurance has become the subject of investigations, litigation, and possibly new regulation. This article provides an overview of finite risk solutions and products, describing their main features and their legitimate role in helping (mainly) industrial companies manage timing, funding, and insurance risks. Finite risk solutions generally take the form of structured insurance products designed to help companies manage risks often regarded as exotic or “tail” risks, such as environmental or asbestos liability. Although such products are underwritten by insurance or reinsurance companies, they typically involve limited risk transfer (hence the name “finite risk”) while providing the insured companies with a means of pre-funding their expected losses, or what is often called “pre-loss financing.” Of course, companies could choose to self-insure such risks by establishing a reserve for future losses. But finite risk provides a more credible and transparent alternative—one that reassures investors both by capping the liability and eliminating the possibility for manipulation of reserves. Abuses of finite risk products usually concern the degree to which transactions are accounted for, disclosed, and represented to investors as achieving “significant risk transfer” when there is little or no such transfer. In the authors' words, “Users of finite should ask themselves whether the transaction helps the financial statements clearly represent the true economic income and risks of the business and, if not, then consider not doing the deal.”

Finite risk reinsurance - increasing capacity in a difficult environment

Finite risk reinsurance - increasing capacity in a difficult environment