Study finds farmers are willing to pay higher premiums for higher coverage in agricultural insurance.
problem Determining the demand factors and WTP for agricultural insurance.
method Conducted a survey of 200 farmers to analyze the impact of socio-demographic variables and premium on insurance purchase decisions.
result Farmers are willing to pay higher premiums for higher coverage in agricultural insurance.
Model predicts individual insurance claim reserves using activation patterns.
problem Accurately predicting individual claim reserves in insurance contracts.
method Multinomial logistic regression to model claim activation and development.
result The model generates accurate predictions of total and per coverage reserves.
This paper maps the insurability of AI risks across various insurance products.
problem Emerging AI risks and their implications for insurance coverage.
method Coding 55 AI threat classes against 26 insurance products using public carrier materials and threat catalogs.
result Identification of a four-tier insurability frontier: affirmatively insured, silent-AI exposures, actively excluded, and unstructured perils.
This paper aims to optimize incident-specific cyber insurance design.
problem Complexity in determining optimal risk retention and transfer.
method Economic foundation for incident-specific cyber insurance with Pareto optimality.
result Illustrates feasibility of designing incident-specific indemnities for both parties.
Study of insurance market equilibria with risk-averse policyholders.
problem Analyzing optimal insurance contracts in a monopoly market with risk-averse policyholders.
method Modeling Stackelberg equilibria with a profit-maximizing insurer and a risk-averse policyholder.
result Equilibrium contracts exhibit a layer-type structure, providing full insurance over pessimistic loss layers and no coverage over optimistic ones.
Paper models demand and solvency for index insurance, combining traditional and measurable index-based coverage.
problem Reducing protection gaps for emerging risks.
method Develops a model for demand and solvency conditions, combining traditional and index-based insurance.
result Deduces a product that benefits from both traditional and index-based insurance approaches.
We study an infinite-horizon optimal investment, consumption and insurance problem for an economic agent who consumes a perishable and a durable good. The agent trades in a risk-free asset, a risky asset, and a durable good whose price follows a correlated diffusion, while the stock of the durable good depreciates dete…
In this paper we study a class of insurance products where the policy holder has the option to insure k of its annual Operational Risk losses in a horizon of T years. This involves a choice of k out of T years in which to apply the insurance policy coverage by making claims against losses in the given year. The…
Optimal insurance contracts are designed to screen risk preferences and risk types under asymmetric information.
problem Designing optimal insurance contracts under asymmetric information and risk types.
method Constructing a menu of contracts that maximizes mean-variance utilities, subject to truth-telling constraints.
result Equilibrium contracts exhibit nonlinear pricing with decreasing risk loadings, inducing self-selection.
Parametric insurance offers better risk-sharing in high-risk settings than traditional indemnity insurance.
problem High-risk environments where traditional indemnity insurance is unaffordable or ineffective.
method Comparison of excess-of-loss indemnity insurance and parametric insurance within a mean-variance framework, considering fixed costs and binding budget constraints.
result Parametric insurance yields higher welfare for risk-averse individuals, especially when indemnity insurance is impractical.
Optimizes hybrid insurance contracts for heavy-tailed losses.
problem Providing insurance against heavy-tailed losses with finite expected loss.
method Combines traditional and parametric insurance, using a Pareto-type criterion for optimization.
result The hybrid contract outperforms traditional contracts in simulations and real data.
Optimal insurance contract limits insurer's risk exposure variance.
problem Designing an optimal insurance contract limiting insurer's risk exposure variance.
method Derive optimal policy semi-analytically, focusing on actuarially fair case.
result Expected coverage is larger for wealthier insured, indicating normal good.
The article proposes a method to make valid insurance claim predictions without relying on specific models.
problem Prediction of insurance claims using statistical models can be unreliable due to model misspecification, selection effects, and lack of finite-sample validity.
method The article employs conformal prediction, a machine learning strategy that is model-free and tuning-parameter-free, ensuring finite-sample validity.
result The proposed method guarantees valid predictions at a pre-assigned coverage probability level and performs well in insurance applications, including meeting Solvency II requirements.
Study finds environmental liability insurance reduces industrial carbon emissions.
problem Reduction of industrial carbon emissions.
method Two-way fixed effect model using provincial (city) level panel data from 2010 to 2020.
result Environmental liability insurance reduces industrial carbon emissions at both direct and indirect levels, with varying effects.
This paper addresses the identification of insurance models with multidimensional screening where insurees have private information about their risk and risk aversion. The model includes a random damage and the possibility of several claims. Screening of insurees relies on their certainty equivalence. The paper then in…
New models for insurance claims accounting for delays.
problem Delayed claims processing affects real-time policy development.
method Introducing transaction time models to describe multi-state life insurance.
result Explicit expressions for transaction time reserves derived.
Modeling reinsurance market, we find subgame perfect Nash equilibria.
problem Optimizing reinsurance market with multiple insurers and reinsurers.
method Sequential game with Subgame Perfect Nash Equilibria analysis.
result Characterized subgame perfect Nash equilibria in some market cases.
Limited liability creates a conflict of interests between policyholders and shareholders of insurance companies. It provides shareholders with incentives to increase the risk of the insurer's assets and liabilities which, in turn, might reduce the value policyholders attach to and premiums they are willing to pay for i…
Study examines how insurance affects households prone to proportional losses, especially those near poverty.
problem Impact of insurance on households susceptible to proportional losses, focusing on poverty traps.
method Modelled proportional capital losses with insurance, derived closed formulae and non-local differential equations.
result New formulae and methods to calculate trapping probability, constraints on parameters to prevent certainty of trapping.
When an insurance note is also a derivative a serious problem arises because a derivative must be fulfilled immediately. This feature of derivatives prevents claims processing procedures that screen out ineligible claims. This, in turn, creates a perverse incentive for insured holders of notes to commit acts that resul…
The online environment has provided a great opportunity for insurance policyholders to share their complaints with respect to different services. These complaints can reveal valuable information for insurance companies who seek to improve their services; however, analyzing a huge number of online complaints is a compli…
Theory integrates loss aversion into expected utility for monetary returns.
problem Modeling loss aversion in expected utility theory.
method Develops state-dependent linear utility functions incorporating loss aversion.
result Contracts from monopolists in insurance markets.
Paper introduces a framework for managing cyber risk with insurance and cybersecurity models.
problem Pervasive challenges in managing cyber risk, especially for capital allocation.
method Combines insurance frequency-severity models with cybersecurity cascade models for comprehensive cyber risk assessment. Facilitates informed capital allocation through a two-pillar framework.
result Demonstrates the necessity of comprehensive cost-benefit analysis for budget-constrained companies.
Improved disability insurance model with collective health claims.
problem Enhance disability insurance model with collective health claims.
method Expand classic semi-Markov model with collective health claims, solve many-body problem using mean-field approach.
result Mean-field approach simplifies complex model into a transparent pricing method.
Algorithmic insurance tackles financial risks from AI errors, proving CVaR-optimal thresholds reduce tail risk.
problem High-stakes AI errors lead to heterogeneous losses, challenging traditional insurance assumptions.
method Analyzed binary classification performance to tail risk exposure, using CVaR to quantify extreme losses.
result CVaR-optimal thresholds reduce tail risk up to 13-fold compared to accuracy maximization.
Paper defines AI-specific loss reconstruction problem and introduces CER framework.
problem Reconstructing AI-generated losses, especially in agentic systems.
method CER framework: C (control boundary), E (evidence reconstruction), R (insurance response).
result Defines AI-specific reconstruction problem and operationalizes it.
This paper investigates Pareto optimal (PO, for short) insurance contracts in a behavioral finance framework, in which the insured evaluates contracts by the rank-dependent utility (RDU) theory and the insurer by the expected value premium principle. The incentive compatibility constraint is taken into account, so the …
New methods for quantifying insurance claim cost uncertainty using LightGBM and GLMs.
problem Quantifying prediction uncertainty in insurance claim costs.
method Proposed non-conformity measures for GLMs and GBMs with Tweedie loss.
result Locally weighted Pearson residuals outperform other methods in maintaining nominal coverage with smallest average width.
mSHAP explains predictions of two-part models, improving fairness and interpretability.
problem Interpreting predictions from two-part models, especially in insurance.
method mSHAP: a method for computing SHAP values of two-part models using the SHAP values of individual models.
result mSHAP is exponentially faster than kernelSHAP for computing approximate SHAP values.
The paper optimizes insurer's dividend, reinsurance, and capital injection strategies for two collaborating business lines.
problem Maximizing expected total dividend payments while managing risk and preventing ruin.
method Solving the problem using a closed-form value function for optimal strategies.
result Optimal strategies include threshold dividend payout, decreasing reinsured risk, and capital injection to prevent ruin.
The paper explores optimal insurance contracts using various deviation measures.
problem Optimal insurance contracts with mean-deviation measures.
method Study of convex signed Choquet integrals and standard deviation as deviation measures, analyzing premium principles like expected value, Value-at-Risk, and Expected Shortfall.
result Characterization of optimal indemnities and deductibles under different premium principles.
The distribution of health care payments to insurance plans has substantial consequences for social policy. Risk adjustment formulas predict spending in health insurance markets in order to provide fair benefits and health care coverage for all enrollees, regardless of their health status. Unfortunately, current risk a…
The paper optimizes insurance strategies for two collaborating business lines.
problem Maximizing dividends and managing risk for two collaborating business lines.
method Closed-form solutions for optimal strategies, including dividend payout, reinsurance, and capital injection.
result Optimal strategies involve pure excess-of-loss reinsurance and transferring reserves to prevent ruin.
Bayesian method improves extreme quantile estimation with zero coverage error.
problem Estimating extreme quantiles with zero coverage error in small samples.
method Bayesian quantile estimation using Jeffreys prior.
result Bayesian method results in zero coverage error, unlike maximum likelihood.
The paper examines the feasibility of managing aggregate cyber-risk in IoT environments.
problem Determining sustainable conditions for providing aggregate cyber-risk coverage.
method Developed a rigorous general theory and validated it with real data.
result Conditions for sustainable aggregate cyber-risk management under heavy-tailed distributions.
The paper optimizes insurer's decisions on dividends, reinsurance, and capital injection under model uncertainty.
problem Maximizing insurer's expected discounted dividends while managing model uncertainty and risk.
method Modeling reserve levels as diffusion processes, solving for optimal strategies in closed form.
result Optimal strategies include barrier dividend and capital injection policies.
New tests for conditional copulas based on decision trees.
problem Testing constancy of conditional dependence structure given conditioning events.
method Data-driven decision trees to maximize differences in conditional Kendall's tau.
result Asymptotic distributions of test statistics under the null hypothesis.
A scenario in which regulators take the drastic step of requiring coverage of all venture bank investment loans using interbank borrowed funds is considered. In this scenario, a minimal amount of default insurance is used, such that Tier 1 and 2 capital requirements are still met. To do this, the default insurance perc…
Study insurance pricing under correlation ambiguity without increasing prices or reducing utility.
problem Understanding the dependence structure between insurance and financial risks.
method Dynamic equilibrium analysis of insurance pricing with worst-case beliefs.
result Correlation ambiguity does not necessarily increase insurance prices or reduce insurers' utility.
Paper proves Pareto efficient insurance for multiple entities.
problem Optimizing insurance for multiple policyholders and insurers.
method Sum-minimization characterization and pairwise implementability analysis.
result Characterization of Pareto efficient insurance arrangements.
Study on systemic risk in European insurance sector, showing insurer connections during stress.
problem Understanding systemic risk connectedness in European insurance sector.
method Common connectedness framework applied to returns, volatility, value-at-risk, and expected shortfall.
result Insurers are a significant component of systemic risk connectedness, especially during stress episodes.
The paper examines how risk reduction and insurance choices interact under convex premium principles.
problem Interaction between self-protection and insurance demand under convex premium principles.
method Investigates optimal prevention efforts and insurance shares using distortion risk measures.
result Self-protection and insurance are complementary, but ex ante moral hazard can turn this into a substitution effect.
The paper examines insurance market dynamics and optimal regulation.
problem Equilibrium outcomes in dynamic insurance markets.
method Analyzes three equilibrium outcomes: positive, zero, and market failure.
result Insurers may accept underwriting losses by investing profits, especially with negative correlations.
We consider an investor who wants to select her/his optimal consumption, investment and insurance policies. Motivated by new insurance products, we allow not only the financial marke but also the insurable loss to depend on the regime of the economy. The objective of the investor is to maximize her/his expected total d…
Two pension funds mutually insure against longevity risk.
problem Mutual insurance against systematic longevity risk for pension funds.
method Mathematical demonstration and market clearing condition.
result Insurance provides little benefit when fund preferences are similar, but can be beneficial when preferences vary significantly.
Reinsurance can help life insurers maintain higher capital guarantees without losing utility.
problem Decreasing capital guarantees in life insurance products.
method Dynamic investment-reinsurance optimization problem with simultaneous Value-at-Risk and no-short-selling constraints. Introduced guarantee-equivalent utility gain for comparison.
result Optimally managed reinsurance allows insurers to offer higher capital guarantees without reducing expected utility.
The study examines how formal index insurance compares to informal risk sharing in managing natural disasters.
problem The challenges of natural disasters and the effectiveness of index insurance in risk management.
method A three-strategy evolutionary game model to analyze the competitive relationship between formal index insurance, informal risk sharing, and non-insurance.
result Basis risk and loss ratio significantly impact the adoption rate of index insurance, with different strategies preferred under varying conditions.
This paper explores how insurance contracts can be traded in financial markets.
problem The exclusion of arbitrage in insurance contracts due to their non-tradability.
method Defining strategies on insurance portfolios and combining them with financial trading strategies.
result The existence of an insurance-finance-consistent probability, leading to the expected discounted cash-flows.