This paper compares the shareholder-value-maximising capital structure and pricing policy of insurance groups against that of stand-alone insurers. Groups can utilise intra-group risk diversification by means of capital and risk transfer instruments. We show that using these instruments enables...

The European insurance industry is awaiting the new EU-wide harmonised Solvency II framework. Before its introduction, it is important to find out which incentive effects can arise from it. Practitioners predict a trend towards consolidation in the insurance sector due to recognition of...

The Liikanen Group proposes contingent convertible (CoCo) bonds as a potential mechanism to enhance financial stability in the banking industry. Especially life insurance companies could serve as CoCo bond holders as they are already the largest purchasers of bank bonds in Europe. We develop a...

The Liikanen Group proposes contingent convertible (CoCo) bonds as a potential mechanism to enhance financial stability in the banking industry. Especially life insurance companies could serve as CoCo bond holders as they are already the largest purchasers of bank bonds in Europe. We develop a...

Motivated by a recent demographic study establishing a link between macroeconomic fluctuations and the mortality index kt in the Lee-Carter model, we assess the impact of macroeconomic fluctuations on the solvency of a life insurance company. Liabilities in our stochastic simulation framework...

Lack of transparency in securitization transactions significantly contributed to the severe financial crisis of 2007–2009. To increase transparency we propose a new mechanism: financial claims with fingerprints. They would allow market participants at each stage of the securitization process...

We experimentally analyze consumers' reactions to insurance default risk. Consistent with earlier studies, we find that insurance with default risk is extremely unattractive to most individuals. A considerable fraction of consumers completely refuse to accept any default risk; others ask for...

Nach den Terrorattacken vom 11. September sehen sich die privaten Erst- und Rückversicherer mit einer völlig veränderten Risikolage konfrontiert, die sie bisher bei ihren Kalkulationen außer Acht ließen. Dr. Michael Wolgast, Gesamtverband der Deutschen Versicherungswirtschaft, schlägt...

The potential need for long-term care (LTC) is one of the greatest financial risks faced not only by the elderly but also by their adult children, who often provide care or financial assistance. We investigate adult children's role in the demand for LTC insurance. Similar to flood insurance, we...

In their 2001 "Journal of Risk and Insurance" article, Stewart C. Myers and James A. Read Jr. propose to use a specific capital allocation method for pricing insurance contracts. We show that in their model framework no capital allocation to lines of business is needed for pricing insurance...