Discussion on the Financial Risks and Countermeasures of the Group Operation of Insurance Companies

2021 ◽  
Keyword(s):  
Insurance Companies ◽  
Financial Risks ◽  
Group Operation

scholarly journals Nested Stochastic Valuation of Large Variable Annuity Portfolios: Monte Carlo Simulation and Synthetic Datasets

2018 ◽  
Author(s):  
Guojun Gan ◽  
Emiliano Valdez
Keyword(s):  
Monte Carlo Simulation ◽  
Monte Carlo ◽  
Insurance Companies ◽  
Financial Risks ◽  
Academic Journals ◽  
Dynamic Hedging ◽  
Computationally Intensive ◽  
Synthetic Datasets

Dynamic hedging has been adopted by many insurance companies to mitigate the financial risks associated with variable annuity guarantees. In order to simulate the performance of dynamic hedging for variable annuity products, insurance companies rely on nested stochastic projections, which is highly computationally intensive and often prohibitive for large variable annuity portfolios. Metamodeling techniques have recently been proposed to address the computational issues. However, it is difficult for researchers to obtain real datasets from insurance companies to test metamodeling techniques and publish the results in academic journals. In this paper, we create synthetic datasets that can be used for the purpose of addressing the computational issues associated with the nested stochastic valuation of large variable annuity portfolios. The runtime used to create these synthetic datasets would be about 3 years if a single CPU were used. These datasets are readily available to researchers and practitioners so that they can focus on testing metamodeling techniques.

scholarly journals Insurance Management in Terms of Globalization Processes in Ukraine

2021 ◽  
Vol 7 (522) ◽  
pp. 207-212
Author(s):  
S. A. Vlasyuk ◽  
Keyword(s):  
Risk Management ◽  
System Analysis ◽  
Management Plan ◽  
Insurance Market ◽  
Insurance Companies ◽  
Effective Control ◽  
Financial Risks ◽  
Potential Risks ◽  
Business Entities

Insurance represents the most efficient risk management instrument that can protect both individuals and business entities from financial risks arising from various unforeseen situations. In turn, expanding the horizons of the insurance market requires clarity and coherence in the activities of insurance companies, and therefore studying the factors that directly affect the management of insurance organizations appears relevant. It is found that one of the forms of risk control is insurance management, which includes the detection, assessment and intervention of risks, that is, a defense strategy for preparing for the unexpected events, as it is regulated by normative legal acts, and the implementation of principles and doctrines that are generally accepted. It is identified that the main methods of insurance management, such as avoidance, preservation, distribution, transfer, prevention and reduction of losses, can be applied to all areas of activity of both individuals and business entities, and can pay off in the long term. The development of the insurance market in Ukraine in the future is possible due to the introduction of an effective mechanism of insurance management based on system analysis and effective control at macro and micro levels. By implementing a risk management plan and considering various potential risks or events before they occur, economic entities can save their own money and protect their future by timely setting of certain contours in order to avoid potential threats, minimize their impact in case of their occurrence, and cope with the results.

scholarly journals Climate risk reporting practices by UK insurance companies and pension schemes

2019 ◽  
Vol 24 ◽  
Author(s):  
P. Klumpes ◽  
M. Acharyya ◽  
G. Kakar ◽  
E. Sturgess
Keyword(s):  
Climate Change ◽  
Risk Management ◽  
Annual Reports ◽  
Insurance Companies ◽  
Climate Risk ◽  
Pension Scheme ◽  
Financial Risks ◽  
Reporting Practices ◽  
Pension Schemes ◽  
Risk Reporting

Abstract Increasing global concern over the impact of climate change has recently led to public scrutiny over the adequacy of existing risk management practices by insurance companies and pension schemes in dealing with these challenges that potentially impact both individual actuaries and the Institute and Faculty of Actuaries generally. Most recently, the Prudential Regulation Authority has issued further guidance concerning its expectations for the UK insurance industry regarding the development of an approach to disclosure on and management of the financial risks from climate change, while a Parliamentary Committee has demanded public clarification from UK pension scheme trustees regarding their degree of engagement with incorporating climate-related financial risks into their investment decision-making. The aim of this paper is to identify the dominating factors of the current evolvement of UK insurance companies’ and pension schemes’ climate risk disclosure practices. This paper analyses both the nature and extent of changes in the risk reporting practices of these entities that have evolved in order to meet these demands for increased accountability. We first analyse relevant sections of latest annual reports produced by a sample of 15 UK insurance companies and 15 pension schemes. We find only limited alignment of insurance firm and pension scheme annual reports with the 11 specific Task Force on Climate-Related Financial Disclosure’s (TCFD) recommended disclosures. We also examine what key financial risk and/or other organisational characteristics are most closely associated with the degree of alignment with TCFD specified disclosures related to governance, strategy, risk management and performance metrics. We find that incentives facing sample insurance companies to align their climate-related disclosures with TCFD recommendations are related to their management of reputation risk (measured on the basis of size and type of business). Whereas the incentives facing pension schemes are related to the desire to reduce information asymmetry (measured by liability risk) among their stakeholders concerning this issue. Further, consistent with a stakeholder theory explanation, it appears that only a minority of large, publicly listed insurance companies and large local government pension schemes are taking action to report on their actions to mitigate climate risk. We also discuss examples of best practice climate risk reporting. The implications for the actuarial profession in engaging with climate risk are discussed in line with the findings of the study.

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

2017 ◽  
pp. 139-149 ◽  
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.

scholarly journals Identifying the volatility of compliance risks for the pension custodian banks

2021 ◽  
Vol 16 (3) ◽  
pp. 113-129
Author(s):  
Svіtlana Achkasova ◽  
Olena Bezrodna ◽  
Yevheniia Ohorodnia
Keyword(s):  
Asset Management ◽  
Cognitive Mapping ◽  
Research Work ◽  
Insurance Companies ◽  
Financial Risks ◽  
Regulatory Capital ◽  
State Budget ◽  
National Bank ◽  
Financial Monitoring ◽  
State Pension

The high probability of risk transfer from banks to their counterparties in the field of non-state pension provision (pension account owners, non-state pension funds, insurance companies, asset management companies, etc.) determines the relevance of this study. The paper aims to develop a toolkit for identifying the compliance risk volatility for pension custodian banks based on causal modeling.This toolkit contributes to: 1) tentative cognitive mapping of the causal relationship between the compliance risks of pension custodian banks in the field of financial monitoring and financial and reputational risks to assess their acceptability by stakeholders in non-state pension programs, and 2) impulse modeling. The created toolkit is based on the performance data provided by Ukrainian banks, as well as on the reports of the National Bank of Ukraine. Apparently, an increase in penalty rates by 0.1% would reduce the compliance risks for banks by 0.03%, and the number of violations in financial monitoring (specifically the improper assessment/reassessment of customer risks) by 0.01%. In turn, the compliance risk volatility inherent in custodian banks affects the variability of their reputational and financial risks. Thus, reducing the compliance risks by 0.1% would improve the reputation of banks and increase their regulatory capital by 0.01%.The study findings substantiate the use of the created toolkit to supplement the risk profile components for pension custodian banks, thereby demonstrating the potential volatility of their compliance risks and their consequences for banks and individual groups of their stakeholders. AcknowledgmentThe work is prepared and financed within the framework of the state budget research work No. 45/20202021 “Formation of a risk-oriented system of accumulative pension provision” (DR No. 0120U101508).

scholarly journals Application of Convex Optimization Results of De Finetti's problem for Proportional Reinsurance (Study case CAARAMA insurance campany in Algiers)

2020 ◽  
Vol 2 (4) ◽  
pp. 86-100
Author(s):  
Zahra Cheraitia ◽  
Hanya Kherchi Medjden
Keyword(s):  
Convex Optimization ◽  
Optimization Problem ◽  
Linear Optimization ◽  
Expected Profit ◽  
Insurance Companies ◽  
Proportional Reinsurance ◽  
Financial Risks ◽  
Jel Codes ◽  
Study Case ◽  
Reinsurance Treaty

The objective of this research is to find the optimal retention level for a proportional reinsurance treaty based on the results of the convex optimization developed in De Finetti’s model. The latter makes it possible to determine the level of retention that achieves the expected profit by the insurer, while minimizing claims volatility. The convex functions appear abundantly in economics and finance. They have remarkable specificities that allows actuaries to minimize financial risks to which some institutions are exposed, especially insurance companies. Therefore, the use of mathematical tools to manage the various risks is paramount.In order to remedy the optimization problem, we have combined the probability of failure method with the "De Finetti" model for proportional reinsurance, which proposed a retention optimization process that minimizes claim volatility for a fixed expected profit based on the results of the non-linear optimization. JEL Codes: C02, C25, C61, G22.

scholarly journals INSURANCE OF FINANCIAL RISKS OF BUSINESS ENTITY: FROM THEORY TO PRACTICE

2017 ◽  
pp. 151-158
Author(s):  
Tetiana Pysmenna
Keyword(s):  
Economic Activity ◽  
Financial Risk ◽  
Insurance Companies ◽  
Financial Risks ◽  
Material Loss ◽  
Insurance Premiums ◽  
Insurance Rate ◽  
The Subject ◽  
Actual Damage ◽  
Risk Insurance

The subject of the study is the theoretical and practical principles of insurance of financial risks of the subject of economic activity. The purpose of the study is to substantiate the theoretical foundations and analyse the practice of financial risk insurance of the entity. It is established that the essence of insurance of financial risks can be formulated in different ways. Often, under this notion we consider the protection of the property interests of the entity in the event of financial risks in its activities, which is carried out at the expense of the insurance company's funds formed from insurance premiums. In the implementation of financial risks, an entity may suffer material loss in the form of actual damage or loss of profit. The tendencies of development of insurance of financial risks in the market of insurance services of Ukraine are determined. They are affected by the change in the volume of gross and net insurance premiums and insurance premiums on insurance of financial risks. On the basis of the assessment of the level of gross and net insurance payments, the insurance of financial risks is classified as a profitable type of insurance to a certain extent. The main types of insurance of financial risks of the subject of economic activity are described. At the domestic insurance market, insurance companies practice loan insurance, insurance guarantees and investment insurance. Each type of insurance of financial risks is carried out in order to protect the property interests of the entity in the event of various insurance incidents. For each type of insurance of financial risks, the insured amount, insurance rate, insurance payment and insurance indemnity must be established. It is concluded that the issue of financial risk insurance needs further research in the consideration of other types of financial risk insurance of the entity.

Reinsurance in Managing Catastrophe and Financial Risk in the Polish Market During the Years 2010-2014

2015 ◽  
Vol 10 (3) ◽  
pp. 263-274
Author(s):  
Andrzej Grzebieniak
Keyword(s):  
Financial Risk ◽  
Class Ii ◽  
Insurance Companies ◽  
Financial Risks ◽  
Insurance Company ◽  
Crucial Importance ◽  
Catastrophic Risk ◽  
Polish Economy ◽  
The Given

Reinsurance plays an important role in managing the risk in an insurance company. Its crucial importance is especially visible in the situation when there is a growth of catastrophic and financial risks on the market. Such a situation has occurred in the Polish market since 2010. In order to achieve financial stabilisation, insurance companies apply reinsurance more frequently so they cede the risk on the reinsurer together with an appropriate part of the premium for the given risk. Catastrophic risk includes, among others, the following groups of insurance: class II- 5, 8, 9, 11 and financial risk in groups 14 and 15. In those insurance groups, the range of reinsurance applied (measured with a percentage of premium given to reinsurers by insurance companies and the percentage of damages received from them in relation to total paid out compensations) was the highest in the analyzed period of time. Research confirmed the hypothesis that together with the growth of catastrophic and financial threats in the Polish economy the range of reinsurance applied in insuring those risks also increases. 

Earnings management by health insurance companies in Brazil

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Antonio Lopo Martinez ◽  
Flávio Alves de Carvalho
Keyword(s):  
Health Insurance ◽  
Earnings Management ◽  
Discretionary Accruals ◽  
Insurance Companies ◽  
Financial Risks ◽  
National Agency ◽  
Operational Decisions ◽  
Content Type ◽  
Health Insurance Companies ◽  
Abnormal Behaviors

PurposeThis study examines whether Brazilian health insurance companies (HICs) engage in earnings management through discretionary accruals or operational decisions by refraining from reporting a low indicator of sustainability in the market (IDSM).Design/methodology/approachThe study used the Jones and Modified Jones models to identify earnings management through discretionary accruals and used the model described by Roychowdhury to estimate the abnormal behaviors of operational decisions. Data covering 2012 to 2018 were collected from the ANS website.FindingsThe results show that HICs engaged in earnings management to avoid reporting a low IDSM. The findings should help health insurance clients make decisions regarding the purchase or change of health insurance. The findings should also encourage regulators to improve their evaluation of the economic and financial risks around HICs.Originality/valueThe National Agency of Supplementary Health (ANS) established a qualification program for HICs, monitoring them based on a set of indicators. Managers may have an incentive to use earnings management to obtain indices that meet the requirements of the ANS qualification program in order to avoid showing signs of abnormality.

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