This paper analyzes the efficiency of stock and mutual organizational forms in the property-liability insurance industry using nonparametric frontier efficiency methods. We test the managerial discretion hypothesis, which predicts that the market will sort organizational forms into market...

One of the most significant economic developments of the past decade has been the convergence of the financial services industry, particularly the capital markets and (re)insurance sectors. Convergence has been driven by the increase in the frequency and severity of catastrophic risk, market...

Purchasing reinsurance reduces insurers insolvency risk by stabilizing loss experience, increasing capacity, limiting liability on specific risks, and/or protecting against catastrophes. Consequently, reinsurance purchase should reduce capital costs. However, transferring risk to reinsurers is...

This paper studies the usage of two common hedging tools, reinsurance and derivatives, by property and casualty insurance companies. In a simple mean-variance efficient optimization model, the two hedging tools display substitutive effect when asset and liability do not display strong natural...

This paper examines the relationship between firm efficiency and stock market reaction to acquisitions and divestitures in the US property-liability insurance industry during the period 1997-2003. We use data envelopment analysis (DEA) to estimate firm cost and revenue efficiency. Abnormal...

This paper presents an event study analysis of the market value impact of operational risk events on non-announcing firms in the U.S. banking and insurance industries. We seek evidence of positive or negative intra or inter-sector spillover effects on stock prices in the commercial banking,...

Minimum interest rate guarantees are included in life insurance products in most countries, but the exact implementations of the guarantees vary significantly across countries. In this paper we develop models of interest rate guarantees in Denmark, Germany, Norway, the U.K., and the U.S. by...

The objective of this paper is to estimate the expected annual costs to taxpayers of federal disaster-related expenditures to provide guidance to federal policymakers in budgeting and formulating disaster relief policy. Our estimates take into account recent trends in the generosity of federal...

This paper reviews the current status of the market for catastrophic risk (CAT) bonds and other risk-linked securities. CAT bonds and other risk-linked securities are innovative financial vehicles that have an important role to play in financing mega-catastrophes and other types of losses. The...

Under perfect market conditions, standard capital budgeting theory predicts that the discount rates on projects should reflect only non-diversifiable risk and be constant across firms. However, theoretical research by Froot and Stein (1998), among others, suggests that when firms invest in...