Examining the Development of Banking Sector Regulations and Supervision Practices across BRICS and G7 Countries

The study examines the development in the banking regulatory practices across BRICS nations over the period 2000–2019. The convergence and sustainability of the regulatory framework in BRICS nations to G7 norms have also been assessed. The analysis is based on five key regulatory measures, which include activity restrictions, entry requirements for a new bank, foreign bank entry restrictions, capital stringency, and deposit insurer powers. The study constructs the regulatory indexes based on the central bank responses to the Bank Regulation and Supervision Survey (BRSS) conducted by the World Bank. To estimate the indexes, the study follows Barth, Caprio, and Levine guidelines. The result reveals that the regulators of BRICS countries impose higher restrictions on bank activities than in the G7 nations. Furthermore, the United Kingdom and Brazilian bank regulators are more liberal and imposed fewer restrictions on insurance activity only. In addition, getting a bank license is tough in both regions. Regulators allow only fit and proper applicants into the banking domain. Furthermore, the authors find that the requirements for capital are becoming more restricted in BRICS nations between 2003 and 2019 to align with Basel capital accords, relative to G7 nations. The study documents a convergence in the banking licensing requirements, and limitations on foreign bank entry and official supervisory powers in the BRICS countries with the G7 nations. The study suggests that the regulators must offer freedom to banks’ activities with increasing supervision, and it boosts the competition in the banking sector and enhances customer welfare. Furthermore, the policymakers need to redesign the deposit insurance mechanism and equip deposit insurers with more powers to enhance the safety of depositors’ interests and minimize the moral hazards in the banking sector in both regions.

EFFECTIVE INSURANCE MECHANISM: METHODOLOGICAL APPROACHES TO EVALUATION

The subject of research, which is covered in the article, is the insurance mechanism, namely: the essence of the insurance mechanism, research methodology, methods for determining the effectiveness. The purpose of the study is to deepen the theoretical foundations for the application of the insurance mechanism by insurers and to formulate approaches to assess its effectiveness. The research methodology is general and special methods. As a result of research on the basis of processing of scientific sources the essence of the insurance mechanism is defined. The analysis of methodological approaches to the study and study of the insurance mechanism allowed to justify the need to supplement them with a systematic approach, which provides consideration of the mechanism from the standpoint of complexity and allows to identify systemic gaps in the operation of insurance companies, government regulation. The insurance mechanism is considered from the point of view of efficiency of its functioning, requirements concerning tasks of the insurance mechanism which degree of performance will testify to efficiency of its action are formulated. The concept of socially significant types of insurance is offered, which allows to expand the meaningful definition of the category of insurance. Methods for evaluating the effectiveness of the insurance mechanism in accordance with the formulated tasks are defined, calculation formulas are given, according to which it is possible to evaluate the efficiency of the insurance mechanism for the components of the tasks. The use of the introduced concepts in the theory of insurance allowed to formulate proposals for improving the insurance legislation in terms of compulsory insurance and government regulation. The scope of the obtained results is the state regulation of non-banking financial institutions activity, and insurance companies activity.

Did the UK policy response to Covid-19 protect household incomes?

We analyse the UK policy response to Covid-19 and its impact on household incomes in the UK in April and May 2020, using microsimulation methods. We estimate that households lost a substantial share of their net income of 6.9% on average. But policies protected household incomes to a substantial degree: compared to the drop in net income, GDP per capita fell by 18.9% between the first and second quarter of 2020. Earnings subsidies (the Coronavirus Job Retention Scheme) protected household finances and provided the main insurance mechanism during the crisis. Besides subsidies, Covid-related increases to state benefits, as well as the automatic stabilisers in the tax and benefit system, played an important role in mitigating the income losses. However, analysing the impact of a near-decade of austerity on the UK safety net, we find that, compared to 2011 policies, the 2020 pre-Covid tax-benefit policies would have been less effective in insuring incomes against the shocks. We also assess the potential distributional impact of introducing a Universal Basic Income (UBI) instead of the Covid emergency measures and find that a UBI would have supported the incomes of different vulnerable groups but would have provided less protection to those hit hardest by the labour market shocks.

Piloting a Weather-Index-Based Crop Insurance System in Bangladesh: Understanding the Challenges of Financial Instruments for Tackling Climate Risks

Bangladesh is one of the most vulnerable countries in the world to extreme climate events. With over 60% of its population living in rural areas, over a third of which lives under the poverty line and depends on agriculture, these climate stresses constitute a major challenge. The traditional financial instruments, e.g., microcredit and relief programs, continue today. However, how climate risk can be tackled through innovative financial instruments focusing on agriculture farms and farmers is crucial. Considering this issue, the Sadharan Bima Corporation and the Bangladesh Meteorological Department joined forces in 2014 to launch a $2.5 million three-year pilot project on weather-index-based crop insurance (WIBCI) executed by the Financial Institutions Division of the Bangladesh government’s Ministry of Finance. This study examined the basic strategy of this pilot project, the major challenges confronted, and possible solutions for creating a successful weather-index-based crop insurance scheme in Bangladesh. We relied on key informant interviews, informal discussions, focus group discussions, and in-depth interviews with the major stakeholders of the WIBCI pilot. These showed the WIBCI pilot to be a promising initiative that still faces problems from limited weather data, a costly business operations system, farmer insurance illiteracy, and fatalism, as well as problems with designing insurance products and recruiting qualified personnel. We compared this WIBCI pilot against the challenges of other projects, recommending best practices for a viable weather-index-based crop insurance system. The insurance mechanism of this study may apply to other vegetation sectors of Bangladesh, e.g., forest plantation or agroforestry for protecting natural resources from natural disasters.

Design Trade-Offs Under Power Asymmetry: COPs and Flexibility Clauses

Negotiating parties to an environmental agreement can manage uncertainty by including flexibility clauses, such as escape and withdrawal clauses. This article investigates a type of uncertainty so far overlooked by the literature: the uncertainty generated by the creation of a Conference of the Parties (COP) in a context of sharp power asymmetry. When negotiating an agreement, it is difficult for powerful states to make a credible commitment to weaker states, whereby they will not abuse their power to influence future COP decision-making. Flexibility clauses provide a solution to this credibility issue. They act as an insurance mechanism in case a powerful state hijacks the COP. Thus we expect that the creation of a collective body interacts with the degree of power asymmetry to make flexibility clauses more likely in environmental agreements. To test this argument, we draw on an original data set of several specific clauses in 2,090 environmental agreements, signed between 1945 and 2018. The results support our hypothesis and suggest that flexibility clauses are an important design feature of adaptive environmental agreements.

Legal regulation and practical features of travel risk insurance

The purpose of this article is to find the most effective ways to protect the interests of citizens traveling on tourist trips. The main problems of tourist insurance have been identified, current aspects of insurance coverage, payment limits, and exclusions from coverage have been reflected. The current situation with various types of insurance used in the tourism industry has been considered, the current problems of civil liability insurance of tourist organizations have been studied, a comparison of the effectiveness of the insurance mechanism and the bank guarantee in this area has been made. Proposals for improving the legal regulation of the responsibility of tourism service providers have been formulated. It has been concluded that it is necessary to use the studied international experience in regulating the civil liability of tourism service providers.

How to Understand the Role of Insurance Mechanism in a Global Pandemic?

The COVID-19 epidemic has seriously affected global economic and social development. The extent to which insurance can play a role in preventing and transferring the risk of infectious diseases has become one of the major concerns of the community. This paper first analyzes the main contents of the U.S. Pandemic Risk Insurance Act during the COVID-19 epidemic and its insights to the global audiences. Then, on the basis of the definition of global pandemic, this paper analyzes the great challenges faced by the insurability of the infectious diseases’ catastrophe from the regional impact, risk accumulation, correlation with capital markets, and accuracy of catastrophe model, and the insurability of local infectious diseases. Finally, this paper presents the key points of the top-level design of the risk transfer mechanism of infectious disease insurance in China. This paper is informative in understanding the role of insurance in the risk transfer of infectious diseases.

A hybrid differential evolution based on gaining‑sharing knowledge algorithm and harris hawks optimization

Differential evolution (DE) is favored by scholars for its simplicity and efficiency, but its ability to balance exploration and exploitation needs to be enhanced. In this paper, a hybrid differential evolution with gaining-sharing knowledge algorithm (GSK) and harris hawks optimization (HHO) is proposed, abbreviated as DEGH. Its main contribution lies are as follows. First, a hybrid mutation operator is constructed in DEGH, in which the two-phase strategy of GSK, the classical mutation operator “rand/1” of DE and the soft besiege rule of HHO are used and improved, forming a double-insurance mechanism for the balance between exploration and exploitation. Second, a novel crossover probability self-adaption strategy is proposed to strengthen the internal relation among mutation, crossover and selection of DE. On this basis, the crossover probability and scaling factor jointly affect the evolution of each individual, thus making the proposed algorithm can better adapt to various optimization problems. In addition, DEGH is compared with eight state-of-the-art DE algorithms on 32 benchmark functions. Experimental results show that the proposed DEGH algorithm is significantly superior to the compared algorithms.

Better Understanding Insurance Mechanism in Dealing with Climate Change Risk, with Special Reference to China

Climate change risk has become an important challenge for global sustainable development. The insurance industry can play an important role in coping with the increasingly severe climate change risk. This paper first describes the increasing climate change risk and the difficulties of the insurance mechanism in dealing with it. Then this paper summarizes the international practice of using the insurance mechanism to deal with climate change risk from ten different aspects. Based on the summary of the role of the insurance mechanism in dealing with this risk in developing countries, this paper puts forward the main application areas for climate change risk insurance and discusses the policy implications of developing climate change risk insurance in China.