Journal of Risk and Insurance最新文献

We analyze how public risk disclosure, specifically Solvency II, impacts life insurers' risk-taking behavior. Using data from 58 German life insurers from 2016 to 2023, we find that publicly reported solvency ratios can affect premium growth and surrender rates. Moreover, insurers appear to improve their solvency ratios following a decline in the previous year. To investigate whether policyholder behavior drives a life insurer's reduced risk-taking, we then develop a model in which a life insurer seeks to maximize shareholder value. Unlike previous research, we consider annually disclosed solvency ratios, affecting policyholders' dynamic purchase and surrender behavior. In our model, the insurer acts less riskily (e.g., holds more reserves and sells less-risky insurance portfolios) to maintain higher solvency ratios and mitigate policyholders' adverse reactions. Our findings motivate public risk disclosure to strengthen market discipline, but its level and design must be carefully calibrated to be effective and avoid undue costs.

We study convergence in the attention of decision-makers across the insurance and banking industries. Our analysis is based on textual risk disclosures (10-K reports, 2006–2018), providing a snapshot of corporate priorities and contexts. We theoretically link convergence with decision-making contexts via the Attention-Based View. Leveraging strategic management theory, we identify antecedents of convergence in attention and, therefore, potentially, risk contagion. These include common trends in the macro-environment, substitution threats, and management fashions. We combine this theoretical framework with machine learning tools to create quantitative measures of convergence in attention and its antecedents. We find that the proposed measure of convergence is predictive of inter- and intra-industry stock correlations. Finally, based on regression and sensitivity analyses, we identify the relative importance of different antecedents, showing that shared risk management fashions largely drive Inter-industry convergence in attention. This highlights challenges when interpreting regulatory text data in the context of predicting contagion risk.

We examine an optimal portfolio problem where an individual receives nontraded labor income and must decide how to allocate her wealth between a stock and a risk-free asset, while also determining the optimal time to retire. Specifically, we explore how incorporating long-run income risk by assuming that labor income and stock prices are cointegrated affects both the optimal asset allocation and retirement strategy. Our findings show that accounting for long-run income risk alters the optimal allocation to risky assets and the timing of retirement. This helps explain why younger individuals with limited wealth are less likely to participate in the stock market, whereas wealthier individuals tend to allocate more to risky assets. Moreover, our findings reveal a positive relationship between stock investment and retirement age, driven by the positive correlation between wealth at retirement and the chosen retirement age.

This study examines the relationship between risk culture and regulation in the insurance industry using textual analysis and machine learning. By analyzing 10-K disclosures, we classify firms into distinct risk culture clusters and find that the risk culture of insurance firms is significantly shaped by their uncertain risk strategies, constraints in defining, implementing, and reporting risks, as well as litigious decisions and risk management practices. A temporal prediction analysis indicates that large insurers maintaining a poor risk culture trend are less likely to reverse it compared to those improving. Moreover, insurance firms show enhanced risk culture post-Dodd–Frank Act. Our findings underscore the potential benefits of regulations aimed at monitoring and overseeing insurers' risk practices.

To investigate financial regret among older Americans, we conduct a controlled experiment in the Health and Retirement Study. We document that many older people regret not having bought longevity protection or long-term care insurance, as well as having retired and claimed social security benefits too early. This is especially true for women, Black, and less wealthy older individuals. Additionally, we find that informing participants about objective survival probabilities boosts regret by 43% regarding not having lifetime income, and by even more for those in good health and still working.