Most property/casualty insurance is provided without intervention or participation by the federal or state governments other than state regulation. For some risks, however, insurance markets are unable to provide sufficient coverage to meet society's needs. These risks - commonly called extreme or catastrophic risks - are uninsurable through conventional insurance...
This paper describes the positive effect that corporate income tax has on capital formation in the presence of liquidity constraints and uninsurable risk. The author uses a dynamic general-equilibrium model in which individuals choose whether to become entrepreneurs or workers. Workers save by holding corporate equity and therefore are subject...
For insurance to be readily available, losses must be predictable. But predictability is required only in the aggregate. It is sufficient to know that x houses will be destroyed by fire or that y vehicles will be damaged in accidents or that z earthquakes or hurricanes will occur in a...
PARIS AFP — You are a small island state, watching your low coastline being slowly gobbled up by rising seas and eroded by storms. You are an Australian or African farmer whose crops have been turned to dust by the third successive year of drought. You are a...
House approves redirecting CAPCO funds DENVER - House members voted 39-26 Friday to redirect proceeds from a troubled $200 million economic development program to a state- run insurance pool for the uninsurable. House Bill 1206 will go to the Senate for consideration. Reps. Lynn...
"As news about the dismemberment of Honeywell's revolutionary integrated risk insurance program filtered through the world of risk management, many wondered if the reversal spelled the end of the much-ballyhooed integrated risk phenomenon. The correlation benefits of pitting different risks against each other via a portfolio approach is...
Life insurance has gone through many transitions through the years. Where once, whole life insurance was the main type of coverage, we now have several options in the life insurance industry. The main types available to healthy clients are term life, universal life, whole life, variable life and variable universal...
A thriving U.S. economy requires large productivity gains, which, in turn, require rapid changes in technology and work procedures. To meet these requirements, large risks need to be insured. To facilitate this, U.S. insurers go offshore to find better financial returns on their reserve funds given the significant tax incentives...
This paper examines the degree to which Americans are saving optimally for retirement. The standard for assessing optimality comes from a life-cycle model that incorporates uncertain lifetimes, uninsurable earnings and medical expenses, progressive taxation, government transfers, and pension and social security benefit functions derived from rich household data. It solves...
This paper draws heavily on the experience with social health reinsurance. It describes reasons for the recovery gap, including uninsurable health expenses, and offers a model for analyzing the role of subsidies financed from taxation, foreign donors, or other sources in filling the gap. It examines the role and extent...
DENVER c Money from a troubled economic development program would be redirected to state-run health insurance program for struggling Coloradans under a bill that advanced Thursday in the state House. House members gave preliminary approval to House Bill 1206, which would direct the proceeds from a $200...
Enterprise risk management can help growing companies protect themselves against the uninsurable. In business, growth is a good thing because it holds the promise of more profit. But growth also means risk -- and the faster the growth, the bigger the risk. Growth forces change throughout the organization, affecting every...
Second-to-die policies are becoming increasingly popular in qualified plans. The advantages of second-to-die policies are that it provides higher coverage, allows an uninsurable or substandard life to obtain coverage, and provides estate tax planning advantages. The tax planning advantages include higher liquidity and the ability to fund tax liabilities upon...
Today, insurers are designing new types of insurance policies covering broader ranges of risks for longer periods, including some risks that previously were uninsurable. Intense rate competition among property and casualty insurers continues to drive down corporate insurance costs and create new opportunities for innovative risk management with new kinds...
This paper computes the optimal progressivity of the income tax code in a dynamic general equilibrium model with household heterogeneity in which uninsurable labor productivity risk gives rise to a nontrivial income and wealth distribution. A progressive tax system serves as a partial substitute for missing insurance markets and enhances...
This paper studies a general-equilibrium economy in which agents have the ability to invest in a risky technology. The investment risk cannot be fully insured with optimal contracts, because shocks are private information. The paper shows that the presence of these risks may lead to an under-accumulation of capital relative...
The case study says that in a typical office of 20 people, chances are that four will suffer from a mental illness this year. Depression, one of the most common, primarily hits workers in their most productive years: the 20s through 40s. Its annual toll on U.S. businesses amounts to...
This paper begins by revisiting the question of why the private terrorism insurance market fails. Clearly, if terrorism insurance is really an "uninsurable risk", the question of an optimal government alternative needs to be raised. However, if the private market, after a period of temporary stress, is independently viable, a...
This paper shows that a life cycle model with realistically calibrated uninsurable labor income risk and moderate risk aversion can simultaneously match stock market participation rates and asset allocation decisions conditional on participation. The key ingredients of the model are Epstein-Zin preferences, a fixed stock market entry cost, and moderate...
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