We use data from a large US life expectancy provider to test for asymmetric information in the secondary life insurance—or life settlement—market. We compare the average difference between realized lifetimes and estimated life expectancies for a sub-sample of settled policies relative to the entire sample. We find a significant positive difference indicating private information on mortality pro...

Most motor bodily injury (BI) claims are settled by negotiation, with fewer than 5% of cases going to court. A well-defined negotiation strategy is thus very useful for insurance companies. In this paper we assume that the monetary compensation awarded in court is the upper amount to be offered by the insurer in the negotiation process. Using a real database, a log-linear model is implemented t...

Financial institutions define their marginal cost of risk on the basis of the gradients of arbitrarily chosen risk measures. We reverse this approach by calculating the marginal cost for a profit-maximizing firm with risk-averse counterparties, and then identifying the risk measure delivering the correct marginal cost. The resulting measure is a weighted average of three parts, each correspondi...

This paper examines the role of the federal government in the market for terrorism reinsurance. We investigate the stock price response of affected industries to a sequence of 13 events culminating in the enactment of the Terrorism Risk Insurance Act (TRIA) of 2002. In the industries most likely to be affected by TRIA—banking, construction, insurance, real estate investment trusts, transportati...

Insolvencies of life insurers in Europe have been virtually nonexistent. The deregulation of European markets, however, is likely to dramatically alter that situation. The goal of this study is two-fold: first, to identify significant variables in the early detection of financially distressed life insurers; and second, to consider the importance of these variables to the evaluation of life insu...

In this paper, we consider the problem of optimal investment, consumption and life insurance for a wage earner who has constant relative risk aversion(CRRA)preferences. The wage earner can invest in zero-coupon bond, stock and life insurance, and can make consumption decision. The interest rate and the volatility of the stock are stochastic, which results in incomplete market. Besides, the labo...

This paper provides a microeconomic basis for simultaneously explaining two phenomena related to health insurance: camou age and ballooning. We use abortions in Switzerland as an illustrative example. First, a signi cant share of abortions is camou aged by contrived medical coding, and second, there is evidence of ballooning in that jurisdictions with strict enforcement of abortion regulation t...

We present a model of flight to quality episodes that emphasizes financial system risk and the Knightian uncertainty surrounding these episodes. In the model, agents are uncertain about the probability distribution of shocks in markets different from theirs, treating such uncertainty as Knightian. Aversion to this uncertainty generates demand for safe financial claims. It also leads agents to r...

We show that investors derive utility from non-pecuniary characteristics of investments by studying impact funds, defined as venture or growth equity funds with dual objectives of generating financial returns and positive externalities. Impact funds earn internal rates of return that are 4.7% less than traditional VC funds in reduced form regressions. Based on estimates of a willingness to pay ...

I consider the popular argument of Medicaid crowding out demand for private long-term care insurance. I show that this argument rests on a wrong counterfactual comparison. Furthermore, I question the welfare-decreasing impact of Medicaid as it neglects a large value of the program in providing access to care. I show that private insurance is unable to o er a similar value. I posit that the low ...