Insurance and Financial Risk Transfer

Abstract. Volcanic eruptions are rare but potentially catastrophic phenomena, affecting societies and economies through different pathways. The 2010 Eyjafjallajökull eruption in Iceland, a medium-sized ash-fall-producing eruption, caused losses in the range of billions of dollars, mainly to the aviation and tourism industries. Financial risk transfer mechanisms such as insurance are used by individuals, companies, governments, etc., to protect themselves from losses associated with natural catastrophes. In this work, we conceptualize and design a parametric risk transfer mechanism to offset losses to building structures arising from large, ash-fall-producing volcanic eruptions. Such a transfer mechanism relies on the objective measurement of physical characteristics of volcanic eruptions that are correlated with the size of resulting losses (in this case, height of the eruptive column and predominant direction of ash dispersal) in order to pre-determine payments to the risk cedent concerned. We apply this risk transfer mechanism to the case of Mount Fuji in Japan by considering a potential risk cedent such as a regional government interested in offsetting losses to dwellings in the heavily populated prefectures of Tokyo and Kanagawa. The simplicity in determining eruptive column height and ash fall dispersal direction makes this design suitable for extrapolation to other volcanic settings worldwide where significant ash-fall-producing eruptions may occur, provided these parameters are reported by an official, reputable agency and a suitable loss model is available for the volcanoes of interest.

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Natural Disaster Risk Financing and Transfer in ASEAN Countries

Oxford Research Encyclopedia of Natural Hazard Science ◽

10.1093/acrefore/9780199389407.013.198 ◽

2020 ◽

Author(s):

Paul Raschky ◽

Sommarat Chantarat

Keyword(s):

Financial Risk ◽

Ad Hoc ◽

Large Fraction ◽

Risk Modeling ◽

Risk Transfer ◽

Multilateral Cooperation ◽

Asean Countries ◽

Transfer Mechanisms ◽

Financial Losses ◽

Disaster Risk Financing

ASEAN countries are frequently hit by a variety of natural disasters, and a large fraction of economic activity in ASEAN countries is located in areas exposed to these natural perils. Increasing disaster damages require ASEA countries to manage the financial losses in a more efficient and proactive manner. Currently, most risk-transfer mechanisms in this region rely on ad-hoc government relief, which is not sustainable. Multilateral cooperation in the areas of risk-modeling and mapping as well as joint efforts to establish financial risk-transfer solutions could help to overcome existing challenges in this area.

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Identification of Enterprise Financial Risk Transfer Path Based on Data Mining

2020 3rd International Conference on Artificial Intelligence and Big Data (ICAIBD) ◽

10.1109/icaibd49809.2020.9137432 ◽

2020 ◽

Author(s):

Yan Zhang ◽

Kaixi Ji ◽

Yong An

Keyword(s):

Data Mining ◽

Financial Risk ◽

Risk Transfer ◽

Transfer Path

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THEORETICAL ORDERING OF THE METHODS AND TOOLS OF FINANCIAL RISK MANAGEMENT OF INSURANCE COMPANIES

Economic Analysis ◽

10.35774/econa2017.01.139 ◽

2017 ◽

pp. 139-149 ◽

Cited By ~ 1

Author(s):

Nataliia Prykazyuk ◽

Lesya Bilokin'

Keyword(s):

Risk Management ◽

Financial Risk ◽

Stress Testing ◽

Insurance Companies ◽

Financial Risks ◽

Insurance Company ◽

Risk Avoidance ◽

Financial Risk Management ◽

Risk Transfer ◽

And Control

Essence of methods and tools of financial risk management of insurance companies are defined. It has been founf out that the methods of financial risk management of the insurer can be called a system of techniques in the field of financial risk management. Its use allows to solve a number of tasks to a certain extent. For example, it can allow to foresee the occurrence of risk events in the process activities of insurance companies and identify different ways of their avoidance, minimization, and transfer, and to take measures to reduce the consequences of occurrence of such events to the insurer. It has been defined that the tools of financial risk management of the insurance company are the totality of means. With their help we can make the analysis, control and funding of possible financial risks of the insurer that can arise in the process of implementation of economic activity. The methods and tools of financial risk management are closely connected. The main methods of financial risk management of the insurance company are analyzed. The most common methods of risk management in insurance are risk assessment, risk avoidance, risk reduction, risk acceptance, risk transfer. The instruments of financial risk management of the insurer, in particular, stress testing, early warning tests, Monte-Carlo, VaR-methodology, methods, which are based on calculation of indicators of ES, EVA and RAROC, as well as hedging, diversification, valuation, self-insurance, co-insurance and reinsurance are defined. The necessity to use the methods and tools of financial risk management by insurance companies is defined. It has ben provrd that the insurance company should choose the most appropriate methods and tools for risk management. The company should also take into account all the peculiarities of its activities and will assist in the evaluation and control of existing and prevention of possible risks.

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Risk Perception Gaps Between Construction Investors and Financial Investors of International Public–Private Partnership (PPP) Projects

Sustainability ◽

10.3390/su12219003 ◽

2020 ◽

Vol 12 (21) ◽

pp. 9003

Author(s):

Chan Young Park ◽

Wooyong Jung ◽

Seung H. Han

Keyword(s):

Risk Perception ◽

Financial Risk ◽

Exposure Period ◽

Public Private Partnership ◽

Private Partnership ◽

The Sustainable Development ◽

Risk Transfer ◽

Construction Risk ◽

Development Phases ◽

Selection Phase

Many international public–private partnership projects have suffered from frequent project pending status or failure because of dissimilar interests among stakeholders over projects’ long development period. Thus, this study compares the perception gaps of 27 risks between Korean construction investors and Korean financial investors depending on different development phases of international public–private partnership projects. In the project selection phase, construction investors and financial investors show few risk perception gaps. However, in the bid and proposal phase, they perceive many risks differently: construction investors tend to perceive the construction risk and financial risk as more important, whereas financial investors perceive stakeholder risk and country risk as more significant. This study also discusses the causes of risk perception gaps from three perspectives: (1) time-dependent risk; (2) risk exposure period; (3) risk transfer and responsibility. These findings will be helpful in recognizing the dynamic risk perception gaps between two leading investors for the sustainable development and investment of international PPP projects.

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FINANCIAL RISK TRANSFER

Environmental Risk Management ◽

10.4324/9781849774680-11 ◽

2014 ◽

pp. 50-57

Keyword(s):

Financial Risk ◽

Risk Transfer

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Design of parametric risk transfer solutions for volcanic eruptions: an application to Japanese volcanoes

10.5194/nhess-2019-41 ◽

2019 ◽

Author(s):

Delioma Oramas-Dorta ◽

Giulio Tirabassi ◽

Guillermo E. Franco ◽

Christina Magill

Keyword(s):

Financial Risk ◽

Volcanic Eruptions ◽

Transfer Mechanism ◽

Column Height ◽

Regional Government ◽

Building Structures ◽

Risk Transfer ◽

Natural Catastrophes ◽

Ash Fall ◽

Eruptive Column

Abstract. Volcanic eruptions are rare but potentially catastrophic phenomena, affecting societies and economies through different pathways. The 2010 Eyjafjallajökull eruption in Iceland, a medium-sized ash fall producing eruption, caused losses in the range of billions of dollars, mainly to the aviation and tourist industries. Financial risk transfer mechanisms such as insurance are used by individuals, companies, Governments, etc. to protect themselves from losses associated to natural catastrophes. In this work, we conceptualize and design a parametric risk transfer mechanism to offset losses to building structures arising from large, ash fall-producing volcanic eruptions. Such transfer mechanism relies on the objective measurement of physical characteristics of volcanic eruptions that are correlated with the size of resulting losses (in this case, height of the eruptive column and predominant direction of ash dispersal), in order to pre-determine payments to the risk cedant concerned. We apply this risk transfer mechanism to the case of Mount Fuji in Japan, by considering a potential risk cedant such as a regional Government interested in offsetting losses to dwellings in the heavily populated Prefectures of Tokyo and Kanagawa. The simplicity in determining eruptive column height and ash fall dispersal direction makes this design suitable for extrapolation to other volcanic settings world-wide where significant ash fall producing eruptions may occur, provided these parameters are reported by an official, reputable agency, and a suitable loss model is available for the volcanoes of interest.

Download Full-text