This paper considers the financial optimization problem of a firm with several sub-businesses striving for its optimal RORAC. An insightful example shows that the implementation of classical gradient capital allocation can be suboptimal if division managers are allowed to venture into all...

Insurance companies can leverage the regulatory requirement of a "Risk Management Own Risk and Solvency Assessment" (RMORSA) to improve risk-to-reward decision-making in general, and business planning in particular. This paper profiles several RMORSA-based improvements and explains how those...

Reputational risk has become a critical concern for most organizations. Insurers, who rely on trust to generate business, are particularly vulnerable. Maintaining a positive reputation, however, is costly, leading to the potential for moral hazard in the form of choosing a lowercost strategy...

Insurance ideas inform legal thought: from tort law, to health law, to theories of distributive justice. Within legal thought, insurance is often conceived as an ideal type in which insurers distribute determinable risks through contracts that fix the parties' obligations in advance. This ideal...

We analyse models for panel data that arise in risk allocation problems, when a given set of sources are the cause of an aggregate risk value. We focus on the modeling and forecasting of proportional contributions to risk. Compositional data methods are proposed and the regression is flexible to...

The United Nations Sendai (2015) framework aims to reduce disaster risk. We offer a careful definition and computation of the individual and property risk targets. Selecting the largest and better studied class of “natural disasters” over the period 1970-2018, we show that individual risk is...

This paper analyzes optimal risk sharing among agents that are endowed with either expected utility preferences or with dual utility preferences. We find that Pareto optimal risk redistributions and the competitive equilibria can be obtained via bargaining with a hypothetical representative...

This paper proposes a new method to introduce coherent risk measures for risks with infinite expectation, such as those characterized by some Pareto distributions. Extensions of the conditional value at risk, the weighted conditional value at risk and other examples are given. Actuarial...

A critical problem in risk analysis involving financial variables is the calculation of risk margins. When there are a number of risks, the total risk margin is often reduced to reflect "diversification benefits." How large should the diversification benefit be? And how should the benefit be...

This study considers a pure exchange economy with insurance against ambiguous loss. Ambiguity preferences are represented by the expected utility with uncertainty (EUUP) theory advocated by Izhakian (2017). The economic premium principle of Buhlmann (1980) is generalized under EUUP. We also...