{"title":"The \"Crisis\" in Medical Malpractice Insurance","authors":"P. Danzon, A. Epstein, Scott J. Johnson","doi":"10.1353/PFS.2004.0006","DOIUrl":"https://doi.org/10.1353/PFS.2004.0006","url":null,"abstract":"","PeriodicalId":124672,"journal":{"name":"Brookings-Wharton Papers on Financial Services","volume":"63 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2004-08-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130018724","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Formal insurance arrangements date back at least to ancient Greece. Marine loans in that era advanced money on a ship or cargo that would be repaid with substantial interest if the voyage succeeded but forfeited if the ship were lost, much like the structure of contemporary catastrophe bonds. The interest rate covered both the cost of capital and the risk of loss. Direct insurance of sea risks, using premiums, probably started around 1300 in Belgium. The first known life insurance policy was written in 1583. By the end of the seventeenth century, sea risk insurance had evolved to a competitive process between underwriters
{"title":"Extending the Theory to Meet the Practice of Insurance","authors":"D. Cutler, R. Zeckhauser","doi":"10.1353/PFS.2004.0002","DOIUrl":"https://doi.org/10.1353/PFS.2004.0002","url":null,"abstract":"Formal insurance arrangements date back at least to ancient Greece. Marine loans in that era advanced money on a ship or cargo that would be repaid with substantial interest if the voyage succeeded but forfeited if the ship were lost, much like the structure of contemporary catastrophe bonds. The interest rate covered both the cost of capital and the risk of loss. Direct insurance of sea risks, using premiums, probably started around 1300 in Belgium. The first known life insurance policy was written in 1583. By the end of the seventeenth century, sea risk insurance had evolved to a competitive process between underwriters","PeriodicalId":124672,"journal":{"name":"Brookings-Wharton Papers on Financial Services","volume":"38 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2004-08-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125621093","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Richard Robert E. Herring, Richard Robert E. Litan
being treated for a life-threatening disease; where drivers could not insure against the costs of accidents, to themselves or third parties; where homeowners could not protect themselves against the financial costs of fires and windstorms; and where firms and professionals could not protect against the financial costs of liability for harm to third parties. Without the ability to transfer these types of financial risks to insurers, members of such a society would be much less willing to take risks in consumption and investment decisions that are critical to the dynamism of capitalist economies. And consequently, such a society would be far less productive than the one in which we now live. Yet as important as insurance is to the functioning of modern economies, it is probably the least well understood of all the financial services commonly sold in the marketplace today. Various events in recent years, however, have focused public attention on the insurance industry. Controversy surrounding the system of medical malpractice insurance has again surfaced, with insurance rates for certain specialties skyrocketing in some states and critics charging that the current approach compensates victims poorly, entails enormous overhead costs, and fails to discipline malpractitioners effectively. Recently, even homeowners’ insurance has raised public policy concerns as insurers attempt to limit their exposure to new types of litigation, such as that over toxic mold in homes, as well as to catastrophic
{"title":"Editors' Summary","authors":"Richard Robert E. Herring, Richard Robert E. Litan","doi":"10.1353/pfs.2004.0007","DOIUrl":"https://doi.org/10.1353/pfs.2004.0007","url":null,"abstract":"being treated for a life-threatening disease; where drivers could not insure against the costs of accidents, to themselves or third parties; where homeowners could not protect themselves against the financial costs of fires and windstorms; and where firms and professionals could not protect against the financial costs of liability for harm to third parties. Without the ability to transfer these types of financial risks to insurers, members of such a society would be much less willing to take risks in consumption and investment decisions that are critical to the dynamism of capitalist economies. And consequently, such a society would be far less productive than the one in which we now live. Yet as important as insurance is to the functioning of modern economies, it is probably the least well understood of all the financial services commonly sold in the marketplace today. Various events in recent years, however, have focused public attention on the insurance industry. Controversy surrounding the system of medical malpractice insurance has again surfaced, with insurance rates for certain specialties skyrocketing in some states and critics charging that the current approach compensates victims poorly, entails enormous overhead costs, and fails to discipline malpractitioners effectively. Recently, even homeowners’ insurance has raised public policy concerns as insurers attempt to limit their exposure to new types of litigation, such as that over toxic mold in homes, as well as to catastrophic","PeriodicalId":124672,"journal":{"name":"Brookings-Wharton Papers on Financial Services","volume":"78 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2004-08-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125084557","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
How do insurance markets spread the risk when events are unknown or even unknowable? We argue that the insurance market is organized to write incomplete contracts such that these risks can be spread, even though complete contracts cannot be written. Both policyholders and insurers hostage their reputations when they engage in trade. The force of these reputation investments leads the parties to negotiate for a settlement when an event that is not covered by the insurance contract occurs. By choice of brokers, the parties can leverage the reputation stakes and thus influence the payoffs for un-contracted events. Thus, we see the role of ex post negotiation as helping to complete markets where otherwise insurance would not have been available. This view contrasts with other recent analyses in which ex post negotiation is seen as a degradation of the insurance market. ∗Doherty and Muermann: Department of Insurance and Risk Management, The Wharton School, University of Pennsylvania, 3620 Locust Walk, Philadelphia, PA 19104-6218, USA, email: doherty@wharton.upenn.edu muermann@wharton.upenn.edu. We wish to thank Christian Laux and Soenje Reiche for valuable comments.
当事件未知甚至不可知时，保险市场如何分散风险?我们认为，保险市场的组织是为了撰写不完整的合同，以便这些风险可以分散，即使无法撰写完整的合同。保单持有人和保险公司在从事贸易时都以自己的声誉为人质。这些声誉投资的力量导致双方在保险合同未涵盖的事件发生时谈判解决。通过选择经纪人，双方可以利用声誉风险，从而影响未签约事件的收益。因此，我们认为事后谈判的作用是帮助完善市场，否则就不会有保险。这一观点与最近的其他分析形成对比，在这些分析中，事后谈判被视为保险市场的退化。* Doherty和Muermann:宾夕法尼亚大学沃顿商学院保险与风险管理系，3620 Locust Walk, Philadelphia, PA 19104-6218, USA, email: doherty@wharton.upenn.edu muermann@wharton.upenn.edu。我们要感谢克里斯蒂安·劳克斯和索恩杰·赖希提出的宝贵意见。
{"title":"Brokers and the Insurance of Non-Verifiable Losses","authors":"N. Doherty, Alexander Muermann","doi":"10.1353/PFS.2004.0008","DOIUrl":"https://doi.org/10.1353/PFS.2004.0008","url":null,"abstract":"How do insurance markets spread the risk when events are unknown or even unknowable? We argue that the insurance market is organized to write incomplete contracts such that these risks can be spread, even though complete contracts cannot be written. Both policyholders and insurers hostage their reputations when they engage in trade. The force of these reputation investments leads the parties to negotiate for a settlement when an event that is not covered by the insurance contract occurs. By choice of brokers, the parties can leverage the reputation stakes and thus influence the payoffs for un-contracted events. Thus, we see the role of ex post negotiation as helping to complete markets where otherwise insurance would not have been available. This view contrasts with other recent analyses in which ex post negotiation is seen as a degradation of the insurance market. ∗Doherty and Muermann: Department of Insurance and Risk Management, The Wharton School, University of Pennsylvania, 3620 Locust Walk, Philadelphia, PA 19104-6218, USA, email: doherty@wharton.upenn.edu muermann@wharton.upenn.edu. We wish to thank Christian Laux and Soenje Reiche for valuable comments.","PeriodicalId":124672,"journal":{"name":"Brookings-Wharton Papers on Financial Services","volume":"58 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2004-08-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124661816","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
exhibit soft-market periods, where premium rates are stable or falling and coverage is readily available, and subsequent hard-market periods, where premium rates and insurers’ reported profits significantly increase and less coverage is available. Conventional wisdom among practitioners and other observers is that soft and hard markets occur in a regular “underwriting cycle.” Like price fluctuations in equity markets, fluctuations in insurance premium rates and coverage availability are difficult to explain fully by standard economic models that assume rational agents and few market frictions. The mid-1980s “liability insurance crisis” remains the most infamous hard market in the United States. The dramatic increases in commercial liability insurance premiums and reductions in coverage availability for some sectors received enormous attention, motivating extensive research on those specific problems and on fluctuations in insurance prices and coverage availability more generally. Large losses from natural catastrophes in the United States during the late 1980s and early 1990s spurred further interest in and research on the dynamics of pricing in reinsurance and primary insurance markets following large, industry-wide losses. The hard market for commercial property and casualty insurance that began in late 2000 and accelerated following the destruction of the World Trade Center in September 2001 focused renewed attention on markets for commercial
{"title":"Tort Liability, Insurance Rates, and the Insurance Cycle","authors":"S. Harrington","doi":"10.1353/PFS.2004.0010","DOIUrl":"https://doi.org/10.1353/PFS.2004.0010","url":null,"abstract":"exhibit soft-market periods, where premium rates are stable or falling and coverage is readily available, and subsequent hard-market periods, where premium rates and insurers’ reported profits significantly increase and less coverage is available. Conventional wisdom among practitioners and other observers is that soft and hard markets occur in a regular “underwriting cycle.” Like price fluctuations in equity markets, fluctuations in insurance premium rates and coverage availability are difficult to explain fully by standard economic models that assume rational agents and few market frictions. The mid-1980s “liability insurance crisis” remains the most infamous hard market in the United States. The dramatic increases in commercial liability insurance premiums and reductions in coverage availability for some sectors received enormous attention, motivating extensive research on those specific problems and on fluctuations in insurance prices and coverage availability more generally. Large losses from natural catastrophes in the United States during the late 1980s and early 1990s spurred further interest in and research on the dynamics of pricing in reinsurance and primary insurance markets following large, industry-wide losses. The hard market for commercial property and casualty insurance that began in late 2000 and accelerated following the destruction of the World Trade Center in September 2001 focused renewed attention on markets for commercial","PeriodicalId":124672,"journal":{"name":"Brookings-Wharton Papers on Financial Services","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2004-08-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116664041","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Comment and Discussion","authors":"Ralph A. Winter","doi":"10.1353/PFS.2004.0013","DOIUrl":"https://doi.org/10.1353/PFS.2004.0013","url":null,"abstract":"","PeriodicalId":124672,"journal":{"name":"Brookings-Wharton Papers on Financial Services","volume":"74 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2004-08-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133069429","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Deregulation of the European financial services market during the 1990s led to an unprecedented wave of mergers and acquisitions (M&As) in the insurance industry. From 1990-2002 there were 2,595 M&As involving European insurers of which 1,669 resulted in a change in control. This paper investigates whether M&As in the European insurance market create value for shareholders by studying the stock price impact of M&A transactions on target and acquiring firms. The analysis shows that European M&As created small negative cumulative average abnormal returns CAARs) for acquirers (generally less than 1%) and substantial positive CAARs for targets (in the range of 12% to 15%). Cross-border transactions were value-neutral for acquirers, whereas within-border transactions led to significant value loss (approximately 2%) for acquirers. For targets, both cross-border and within-border transactions led to substantial value-creation.
{"title":"Consolidation in the European Insurance Industry: Do Mergers and Acquisitions Create Value for Shareholders?","authors":"J. Cummins, Mary A. Weiss","doi":"10.2139/ssrn.558044","DOIUrl":"https://doi.org/10.2139/ssrn.558044","url":null,"abstract":"Deregulation of the European financial services market during the 1990s led to an unprecedented wave of mergers and acquisitions (M&As) in the insurance industry. From 1990-2002 there were 2,595 M&As involving European insurers of which 1,669 resulted in a change in control. This paper investigates whether M&As in the European insurance market create value for shareholders by studying the stock price impact of M&A transactions on target and acquiring firms. The analysis shows that European M&As created small negative cumulative average abnormal returns CAARs) for acquirers (generally less than 1%) and substantial positive CAARs for targets (in the range of 12% to 15%). Cross-border transactions were value-neutral for acquirers, whereas within-border transactions led to significant value loss (approximately 2%) for acquirers. For targets, both cross-border and within-border transactions led to substantial value-creation.","PeriodicalId":124672,"journal":{"name":"Brookings-Wharton Papers on Financial Services","volume":"70 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2004-02-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115753547","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper analyzes the benefits and costs of integrated financial services provision (IFSP), that is, the ability of a financial institution to provide all types of financial services under one roof, with special reference to developing countries. Most analytical and empirical work to date finds IFSP to be beneficial for economies and firms as it enhances the efficiency of the financial sector, widens access to financial services, and reduces financial sector specific and overall economic volatility. The (limited) available evidence for emerging markets is even stronger. It also suggests important static and dynamic gains from IFSP, particularly in developing non-bank financial services such as pension and insurance services. Possibly reflecting these greater gains, emerging markets have a relatively large presence of financial conglomerates when considering the restrictions their governments impose. IFSP can have risks, however, and requires enhanced regulation and supervision in some areas, especially to prevent (more) leakage from any publicly-provided safety net, and puts more emphasis on ensuring a contestable financial system.
{"title":"Benefits and Costs on Integrated Financial Services Provision in Developing Countries","authors":"S. Claessens","doi":"10.1353/PFS.2003.0002","DOIUrl":"https://doi.org/10.1353/PFS.2003.0002","url":null,"abstract":"This paper analyzes the benefits and costs of integrated financial services provision (IFSP), that is, the ability of a financial institution to provide all types of financial services under one roof, with special reference to developing countries. Most analytical and empirical work to date finds IFSP to be beneficial for economies and firms as it enhances the efficiency of the financial sector, widens access to financial services, and reduces financial sector specific and overall economic volatility. The (limited) available evidence for emerging markets is even stronger. It also suggests important static and dynamic gains from IFSP, particularly in developing non-bank financial services such as pension and insurance services. Possibly reflecting these greater gains, emerging markets have a relatively large presence of financial conglomerates when considering the restrictions their governments impose. IFSP can have risks, however, and requires enhanced regulation and supervision in some areas, especially to prevent (more) leakage from any publicly-provided safety net, and puts more emphasis on ensuring a contestable financial system.","PeriodicalId":124672,"journal":{"name":"Brookings-Wharton Papers on Financial Services","volume":"6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2003-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126942706","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A removably attachable storage organizer which hangs on the upper most surface of a hospital bed rail. Inner and outer facing panels have attached to them a plurality of pockets capable of storing a variety of personal items that a patient may have with them during a stay at the hospital. A hingably connected rigid spine member connect the inner and outer panels together and a carry handle runs several inches above and parallel to the rigid spine and is held in place by flanges located at each end of the spine. Removably attachable straps are attached to either end of the organizer which prevent the organizer from sliding when the head of the bed is in a raised position causing the rail portion of the bed to be angled. A lockable storage box fits securely in one of the pockets and some of the pockets have specialized front surfaces for example, a slit front surface for the dispensing of facial tissue and a framed front surface for inserting a photograph of the like. The outer most surface of the outer pockets has a thin pocket for inserting a label containing the patients name.
{"title":"Risk in Financial Conglomerates: Management and Supervision","authors":"Iman van Lelyveld, A. Schilder","doi":"10.1353/PFS.2003.0006","DOIUrl":"https://doi.org/10.1353/PFS.2003.0006","url":null,"abstract":"A removably attachable storage organizer which hangs on the upper most surface of a hospital bed rail. Inner and outer facing panels have attached to them a plurality of pockets capable of storing a variety of personal items that a patient may have with them during a stay at the hospital. A hingably connected rigid spine member connect the inner and outer panels together and a carry handle runs several inches above and parallel to the rigid spine and is held in place by flanges located at each end of the spine. Removably attachable straps are attached to either end of the organizer which prevent the organizer from sliding when the head of the bed is in a raised position causing the rail portion of the bed to be angled. A lockable storage box fits securely in one of the pockets and some of the pockets have specialized front surfaces for example, a slit front surface for the dispensing of facial tissue and a framed front surface for inserting a photograph of the like. The outer most surface of the outer pockets has a thin pocket for inserting a label containing the patients name.","PeriodicalId":124672,"journal":{"name":"Brookings-Wharton Papers on Financial Services","volume":"2003 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2003-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130918294","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The purpose of this paper is to take the analysis one step further by focusing on the key question as regards the organizational structure: what are the pros and cons of combining different supervisory activities within one organization? In this context, we start by briefly describing the old and new Dutch supervisory models. The question is: how did we arrive at the new model? To answer this question, we take a closer look at financial market developments. We then compare cross-sector organizational models for financial supervision. We introduce a new framework for comparing these models and apply it to the functional model of the Netherlands and the integrated model of the United Kingdom. While confirming the familiar conclusion that there is no uniform best model,
{"title":"Cross-Sector Supervision: Which Model?","authors":"J. Kremers, D. Schoenmaker, Peter Wierts","doi":"10.1353/PFS.2003.0004","DOIUrl":"https://doi.org/10.1353/PFS.2003.0004","url":null,"abstract":"The purpose of this paper is to take the analysis one step further by focusing on the key question as regards the organizational structure: what are the pros and cons of combining different supervisory activities within one organization? In this context, we start by briefly describing the old and new Dutch supervisory models. The question is: how did we arrive at the new model? To answer this question, we take a closer look at financial market developments. We then compare cross-sector organizational models for financial supervision. We introduce a new framework for comparing these models and apply it to the functional model of the Netherlands and the integrated model of the United Kingdom. While confirming the familiar conclusion that there is no uniform best model,","PeriodicalId":124672,"journal":{"name":"Brookings-Wharton Papers on Financial Services","volume":"6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2003-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134205321","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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