Abstract In the Asia-Oceania region with its vulnerable infrastructure, people continue to suffer from natural disasters such as earthquakes, cyclones or floods. In order to construct resilient society, the risk control for prevention-reduction of disasters and the risk finance for restoration and revival is indispensable. This article shows the necessity of building reinsurance functions which enables the underwriting of natural disasters in this area and arrangements of its requirements and conditions. The improvement of infrastructure for natural disaster and the alleviating of poverty are the premises of these issues and have close relations with developing financial markets and diversifying financial-insurance measures. This article shines light on the integrated framework of these factors and the methodology. Ensuring resilience against natural disaster must be shared objectives among the countries in this region with low insurance diffusion and multifarious backgrounds of economy, society and culture. The regional partnership and the support of the global community should play an important role for ensuring resilience. Building the reinsurance function of natural disasters in this region follows the same path with the realization of “Principles for Sustainable Insurance”.
{"title":"Effective Structure of Reinsurance Function for Disaster Risk in the Asia-Oceania Region","authors":"N. Kato","doi":"10.1515/apjri-2014-0035","DOIUrl":"https://doi.org/10.1515/apjri-2014-0035","url":null,"abstract":"Abstract In the Asia-Oceania region with its vulnerable infrastructure, people continue to suffer from natural disasters such as earthquakes, cyclones or floods. In order to construct resilient society, the risk control for prevention-reduction of disasters and the risk finance for restoration and revival is indispensable. This article shows the necessity of building reinsurance functions which enables the underwriting of natural disasters in this area and arrangements of its requirements and conditions. The improvement of infrastructure for natural disaster and the alleviating of poverty are the premises of these issues and have close relations with developing financial markets and diversifying financial-insurance measures. This article shines light on the integrated framework of these factors and the methodology. Ensuring resilience against natural disaster must be shared objectives among the countries in this region with low insurance diffusion and multifarious backgrounds of economy, society and culture. The regional partnership and the support of the global community should play an important role for ensuring resilience. Building the reinsurance function of natural disasters in this region follows the same path with the realization of “Principles for Sustainable Insurance”.","PeriodicalId":244368,"journal":{"name":"Asia-Pacific Journal of Risk and Insurance","volume":"9 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-01-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127802318","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}
Abstract Continuing rapid changes in the level and pattern of mortality require that forecasts are available that are timely, relevant and reliable. This paper evaluates a previous forecast of the mortality and longevity of Australian seniors, both in terms of the validity of the chosen method – the Booth–Maindonald–Smith (BMS) variant of Lee–Carter – and the accuracy and reliability of the forecast itself. The validity of the method is assessed by a comprehensive review and evaluation of available methods, confirming BMS as the method of choice. The accuracy and reliability of the forecast is assessed by comparing it with actual experience and with a new forecast of period and cohort survival probabilities and life expectancies. The evaluation and the current forecast itself will inform the actuarial profession and wider industry in the areas of mortality and longevity risk as well as public debate and policy in population health and ageing.
{"title":"The Longevity Prospects of Australian Seniors: An Evaluation of Forecast Method and Outcome","authors":"L. Tickle, H. Booth","doi":"10.1515/apjri-2013-0004","DOIUrl":"https://doi.org/10.1515/apjri-2013-0004","url":null,"abstract":"Abstract Continuing rapid changes in the level and pattern of mortality require that forecasts are available that are timely, relevant and reliable. This paper evaluates a previous forecast of the mortality and longevity of Australian seniors, both in terms of the validity of the chosen method – the Booth–Maindonald–Smith (BMS) variant of Lee–Carter – and the accuracy and reliability of the forecast itself. The validity of the method is assessed by a comprehensive review and evaluation of available methods, confirming BMS as the method of choice. The accuracy and reliability of the forecast is assessed by comparing it with actual experience and with a new forecast of period and cohort survival probabilities and life expectancies. The evaluation and the current forecast itself will inform the actuarial profession and wider industry in the areas of mortality and longevity risk as well as public debate and policy in population health and ageing.","PeriodicalId":244368,"journal":{"name":"Asia-Pacific Journal of Risk and Insurance","volume":"60 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115295226","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 examines the firm-specific factors determining the use of derivatives by the sample of Japanese life and non-life Japanese insurance companies during the period of 2001–2011. We find that the participation rate for the use of derivatives by insurance companies in Japan is 73.2%, much higher than those found in the US, the UK, or Australia. Using the Probit and Tobit regression models, we provide evidence that the decision to use derivatives of Japanese insurance companies is positively related to firm size, leverage, organizational form, and proportion of assets invested in stocks and bonds, but negatively associated with reinsurance dependence. We also find that the decision of Japanese insurance companies to extend their markets by operating globally increases the need for derivatives contracts.
{"title":"The Determinants of the Use of Derivatives in the Japanese Insurance Companies","authors":"Lantara I Wayan Nuka, T. Atsushi","doi":"10.1515/APJRI-2012-0008","DOIUrl":"https://doi.org/10.1515/APJRI-2012-0008","url":null,"abstract":"This paper examines the firm-specific factors determining the use of derivatives by the sample of Japanese life and non-life Japanese insurance companies during the period of 2001–2011. We find that the participation rate for the use of derivatives by insurance companies in Japan is 73.2%, much higher than those found in the US, the UK, or Australia. Using the Probit and Tobit regression models, we provide evidence that the decision to use derivatives of Japanese insurance companies is positively related to firm size, leverage, organizational form, and proportion of assets invested in stocks and bonds, but negatively associated with reinsurance dependence. We also find that the decision of Japanese insurance companies to extend their markets by operating globally increases the need for derivatives contracts.","PeriodicalId":244368,"journal":{"name":"Asia-Pacific Journal of Risk and Insurance","volume":"76 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-07-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126948782","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}
Abstract The purpose of this study is to investigate whether private insurance is a normal good by examining the effects of public insurance. Also, this study investigates how the amount of public insurance premium affects to the private insurance demand. The main results of this study are as follows. First, the private insurance has a tendency to be a normal good whether the public insurance benefit is fixed to household income. Second, the degree of loading of public insurance and average probability of accident taking place, which are the components of public insurance premium, relates to the private insurance demand, but whether this relation is positive or negative is indeterminate unless private insurance is actuarially fair.
{"title":"The Impact of Public Insurance on Private Insurance Demand","authors":"Mahito Okura","doi":"10.1515/apjri-2014-0021","DOIUrl":"https://doi.org/10.1515/apjri-2014-0021","url":null,"abstract":"Abstract The purpose of this study is to investigate whether private insurance is a normal good by examining the effects of public insurance. Also, this study investigates how the amount of public insurance premium affects to the private insurance demand. The main results of this study are as follows. First, the private insurance has a tendency to be a normal good whether the public insurance benefit is fixed to household income. Second, the degree of loading of public insurance and average probability of accident taking place, which are the components of public insurance premium, relates to the private insurance demand, but whether this relation is positive or negative is indeterminate unless private insurance is actuarially fair.","PeriodicalId":244368,"journal":{"name":"Asia-Pacific Journal of Risk and Insurance","volume":"7 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114351938","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}
Niranjan Chipalkatti, Bonnie G. Buchanan, Bruce S. Koch, J. Doh
Abstract In a complex global business environment, more organizations are relying on offshoring to provide critical information technology services (ITS). While there can be substantial cost savings for the offshoring firm, the decision to offshore ITS involves a considerable degree of uncertainty and it is essential to understand the issues and hurdles that will be faced by the offshoring operation. Based on a sample of 189 firms from 34 industries (with most coming from the Asia-Pacific region) that have made at least one offshoring decision, we find that larger market capitalized firms are more likely to outsource offshore than smaller firms. Our results also indicate an initial decrease in downside risk with a diminution in the decline, as offshore intensity increases. We also find some evidence of offshoring’s contribution to growth premia. In considering contingencies to adopt in order to manage downside risk, a real-options framework is discussed. Our findings support the view of offshoring as a dynamic process firms use to create value by leveraging growth options and mitigating risk. By considering the real-options possibilities, the investor gets a better picture of the potential losses and gains which should lead to more prudent IT offshoring investment decisions.
{"title":"Enhancing Value in IT Services Offshoring: Real Options Matter","authors":"Niranjan Chipalkatti, Bonnie G. Buchanan, Bruce S. Koch, J. Doh","doi":"10.1515/apjri-2013-0019","DOIUrl":"https://doi.org/10.1515/apjri-2013-0019","url":null,"abstract":"Abstract In a complex global business environment, more organizations are relying on offshoring to provide critical information technology services (ITS). While there can be substantial cost savings for the offshoring firm, the decision to offshore ITS involves a considerable degree of uncertainty and it is essential to understand the issues and hurdles that will be faced by the offshoring operation. Based on a sample of 189 firms from 34 industries (with most coming from the Asia-Pacific region) that have made at least one offshoring decision, we find that larger market capitalized firms are more likely to outsource offshore than smaller firms. Our results also indicate an initial decrease in downside risk with a diminution in the decline, as offshore intensity increases. We also find some evidence of offshoring’s contribution to growth premia. In considering contingencies to adopt in order to manage downside risk, a real-options framework is discussed. Our findings support the view of offshoring as a dynamic process firms use to create value by leveraging growth options and mitigating risk. By considering the real-options possibilities, the investor gets a better picture of the potential losses and gains which should lead to more prudent IT offshoring investment decisions.","PeriodicalId":244368,"journal":{"name":"Asia-Pacific Journal of Risk and Insurance","volume":"56 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-01-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124530647","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}
Abstract These days aging population is a common phenomenon in most countries in the world. As a result, many countries are making great effort to improve the quality of life of elderly people after retirement. A long-term care insurance system is one of the products of those efforts. In the middle of year 2008, long term care insurance as a form of social insurance was introduced in Korea and has been providing various services for people who need assistance with daily living activities. A myriad of opinions from various perspectives such as finance and quality have been suggested for improvement of the system. In order to resolve problems and to reflect suggestions for the purpose of developing the system, the future demand and cost needs to be carefully estimated. Also, various important decisions associated with the insurance policy should be based on the results of the projection. This paper provides a case study of public long-term care insurance in Korea and discusses methods to make projections on the future costs of long-term care insurance.
{"title":"Projecting the Cost of Long-Term Care Insurance in Korea","authors":"Hyuk-Sung Kwon, Chang-Soo Lee, Jun-Soo Hur","doi":"10.1515/2153-3792.1163","DOIUrl":"https://doi.org/10.1515/2153-3792.1163","url":null,"abstract":"Abstract These days aging population is a common phenomenon in most countries in the world. As a result, many countries are making great effort to improve the quality of life of elderly people after retirement. A long-term care insurance system is one of the products of those efforts. In the middle of year 2008, long term care insurance as a form of social insurance was introduced in Korea and has been providing various services for people who need assistance with daily living activities. A myriad of opinions from various perspectives such as finance and quality have been suggested for improvement of the system. In order to resolve problems and to reflect suggestions for the purpose of developing the system, the future demand and cost needs to be carefully estimated. Also, various important decisions associated with the insurance policy should be based on the results of the projection. This paper provides a case study of public long-term care insurance in Korea and discusses methods to make projections on the future costs of long-term care insurance.","PeriodicalId":244368,"journal":{"name":"Asia-Pacific Journal of Risk and Insurance","volume":"84 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-12-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114972639","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}
P. Brockett, Chao-Chun Leng, Min-Ming Wen, Charles C. Yang
Political risk is an important consideration in the capital budgeting process for firms contemplating foreign direct investment (FDI) in emerging markets or in volatile political environments. Unfortunately, the unique characteristics of political risk make the application of familiar actuarially-based pricing models almost infeasible for valuating political risk insurance. In this article we employ utility theory instead to derive an equilibrium price (premium). This price maximizes an insurer’s expected profit and the insured’s expected utility, while taking into account the effects of risk control (self-protection) and risk financing (self-insurance). In addition, within this equilibrium framework, we derive the boundary level for the amount of foreign investment, the amount of political risk insurance coverage, and the minimum required rate of return of foreign investment. Finally, we employ a constant relative risk aversion (CRRA) utility function to illustrate the theoretical equilibrium model.
{"title":"Political Risk Insurance and Foreign Direct Investments","authors":"P. Brockett, Chao-Chun Leng, Min-Ming Wen, Charles C. Yang","doi":"10.1515/2153-3792.1108","DOIUrl":"https://doi.org/10.1515/2153-3792.1108","url":null,"abstract":"Political risk is an important consideration in the capital budgeting process for firms contemplating foreign direct investment (FDI) in emerging markets or in volatile political environments. Unfortunately, the unique characteristics of political risk make the application of familiar actuarially-based pricing models almost infeasible for valuating political risk insurance. In this article we employ utility theory instead to derive an equilibrium price (premium). This price maximizes an insurer’s expected profit and the insured’s expected utility, while taking into account the effects of risk control (self-protection) and risk financing (self-insurance). In addition, within this equilibrium framework, we derive the boundary level for the amount of foreign investment, the amount of political risk insurance coverage, and the minimum required rate of return of foreign investment. Finally, we employ a constant relative risk aversion (CRRA) utility function to illustrate the theoretical equilibrium model.","PeriodicalId":244368,"journal":{"name":"Asia-Pacific Journal of Risk and Insurance","volume":"7 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-02-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114886825","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}
In this paper, we investigate the asymptotic behavior of the finite-time ruin probability in a general risk model with constant interest force, in which the claims are of a widely upper orthant dependence structure, belonging to the intersection of long-tailed class and dominant variation class, and arriving according to an arbitrary counting process. The results we obtained can extend and improve some existing results.
{"title":"Asymptotic Behavior of the Finite-Time Ruin Probability with Constant Interest Force and WUOD Heavy-Tailed Claims","authors":"Qingwu Gao, Peng Gu, Na Jin","doi":"10.1515/2153-3792.1129","DOIUrl":"https://doi.org/10.1515/2153-3792.1129","url":null,"abstract":"In this paper, we investigate the asymptotic behavior of the finite-time ruin probability in a general risk model with constant interest force, in which the claims are of a widely upper orthant dependence structure, belonging to the intersection of long-tailed class and dominant variation class, and arriving according to an arbitrary counting process. The results we obtained can extend and improve some existing results.","PeriodicalId":244368,"journal":{"name":"Asia-Pacific Journal of Risk and Insurance","volume":"205 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-01-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133171777","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}
Abstract This paper contributes to a better understanding of the risks involved in a life annuity investment. We study the full distribution of weighted annuity benefits and quantify risk measures such as dispersion and skewness, thereby extending the usefulness of the popular money’s worth valuation framework for life annuities. Using data from pension annuities in Singapore, we also introduce several risk measures that might appeal to less financially sophisticated retirees. A more detailed and accurate picture of the risk of investing in life annuities emerges, enabling prospective annuitants to differentiate among products that may appear seemingly uniform in terms of money’s worth, but vary widely in terms of their risk attributes.
{"title":"Improving Money’s Worth Ratio Calculations: The Case of Singapore’s Pension Annuities","authors":"Joelle H. Fong, J. Lemaire, Y. Tse","doi":"10.1515/apjri-2013-0027","DOIUrl":"https://doi.org/10.1515/apjri-2013-0027","url":null,"abstract":"Abstract This paper contributes to a better understanding of the risks involved in a life annuity investment. We study the full distribution of weighted annuity benefits and quantify risk measures such as dispersion and skewness, thereby extending the usefulness of the popular money’s worth valuation framework for life annuities. Using data from pension annuities in Singapore, we also introduce several risk measures that might appeal to less financially sophisticated retirees. A more detailed and accurate picture of the risk of investing in life annuities emerges, enabling prospective annuitants to differentiate among products that may appear seemingly uniform in terms of money’s worth, but vary widely in terms of their risk attributes.","PeriodicalId":244368,"journal":{"name":"Asia-Pacific Journal of Risk and Insurance","volume":"34 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-09-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132407769","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 large body of literature addresses the determination of the economic, financial and institutional factors that significantly influence variations of life insurance demand across countries. Chui and Kwok (2008) included four cultural variables developed by IBM psychologist Hofstede and demonstrated that culture has a profound impact on life insurance consumption. We extend Chui and Kwok's work by analyzing the fifth Hofstede cultural dimension: Long-Term Orientation, a variable that scores countries based on adherence to Confucian principles such as perseverance and thrift, respect of tradition and family values, and honoring of parents and ancestors. After building a database that includes values of 17 variables for 27 countries over a period of 9 years, we apply an unbalanced panel GLS regression model to prove that Long-Term Orientation has a strong positive influence on life insurance demand. Additionally, two new variables, not used in previous life insurance literature, are also found to impact life insurance demand: a modified Herfindahl index and the use of a Common Law legal system. Several robustness tests confirm the importance of Long-Term Orientation, leading to the conclusion that life insurance consumption is bound to increase rapidly in Asia, as its GDP per capita increases.
{"title":"Culture Matters: Long-Term Orientation and the Demand for Life Insurance","authors":"Park Sojung, Lemaire Jean","doi":"10.2202/2153-3792.1105","DOIUrl":"https://doi.org/10.2202/2153-3792.1105","url":null,"abstract":"A large body of literature addresses the determination of the economic, financial and institutional factors that significantly influence variations of life insurance demand across countries. Chui and Kwok (2008) included four cultural variables developed by IBM psychologist Hofstede and demonstrated that culture has a profound impact on life insurance consumption. We extend Chui and Kwok's work by analyzing the fifth Hofstede cultural dimension: Long-Term Orientation, a variable that scores countries based on adherence to Confucian principles such as perseverance and thrift, respect of tradition and family values, and honoring of parents and ancestors. After building a database that includes values of 17 variables for 27 countries over a period of 9 years, we apply an unbalanced panel GLS regression model to prove that Long-Term Orientation has a strong positive influence on life insurance demand. Additionally, two new variables, not used in previous life insurance literature, are also found to impact life insurance demand: a modified Herfindahl index and the use of a Common Law legal system. Several robustness tests confirm the importance of Long-Term Orientation, leading to the conclusion that life insurance consumption is bound to increase rapidly in Asia, as its GDP per capita increases.","PeriodicalId":244368,"journal":{"name":"Asia-Pacific Journal of Risk and Insurance","volume":"16 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-07-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122672830","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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