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Full-Text Articles in Insurance

The Missing Monitor In Corporate Governance: The Directors' And Officers' Liability Insurer, Tom Baker, Sean J. Griffith Jan 2007

The Missing Monitor In Corporate Governance: The Directors' And Officers' Liability Insurer, Tom Baker, Sean J. Griffith

Faculty Scholarship at Penn Law

This article reports the results of empirical research on the monitoring role of directors’ and officers’ liability insurance (D&O insurance) companies in American corporate governance. Economic theory provides three reasons to expect D&O insurers to serve as corporate governance monitors: first, monitoring provides insurers with a way to manage moral hazard; second, monitoring provides benefits to shareholders who might not otherwise need the risk distribution that D&O insurance provides; and third, the “bonding” provided by risk distribution gives insurers a comparative advantage in monitoring. Nevertheless, we find that D&O insurers neither monitor corporate governance during the life of the insurance contract nor manage litigation defense costs once claims arise. Our findings raise significant questions about the value of D&O insurance for shareholders as well as the deterrent effect of corporate and securities ...


Rapid Calculation Of The Price Of Guaranteed Minimum Death Benefit Ratchet Options Embedded In Annuities, Eric R. Ulm Jan 2004

Rapid Calculation Of The Price Of Guaranteed Minimum Death Benefit Ratchet Options Embedded In Annuities, Eric R. Ulm

Journal of Actuarial Practice 1993-2006

This paper presents a new method of obtaining quick and accurate values and deltas for discrete look back options using Taylor series expansions. This method is applied to the case of ratchet guaranteed minimum death benefits attached to annuity contracts, and the method is extended to include annuities where a fixed fund is attached to the variable account. Finally, both the speed and the accuracy of the method are compared to Monte Carlo simulation and the exact analytic solution. The Taylor expansion method is shown to be faster and, in most cases, more accurate than the alternative methods.


Determination Of Optimal Premiums As A Constrained Optimization Problem, Farrokh Guiahi Jan 1999

Determination Of Optimal Premiums As A Constrained Optimization Problem, Farrokh Guiahi

Journal of Actuarial Practice 1993-2006

A simple stochastic model of an insurer's underwriting and related investment operations is used to determine the optimal amounts of written premiums for one period for the insurer's book of business. The written premium for each class is determined by the solution of a constrained optimization problem. The insurer's objective function is the expected profit on a book of business over the period. The insurer has a safety constraint where a certain portion of capital and surplus can be depleted with a small probability. This paper provides an explicit solution for optimum expected profit and corresponding written ...


Dynamic Immunization And Transaction Costs With Different Term Structure Models, Eliseo Navarro, Juan M. Nave Jan 1997

Dynamic Immunization And Transaction Costs With Different Term Structure Models, Eliseo Navarro, Juan M. Nave

Journal of Actuarial Practice 1993-2006

A bond portfolio selection model is developed in a dynamic framework using different term structures, but without transactions costs. We show that the optimal portfolios are consistent with Khang's dynamic immunization theorem, i.e., the optimal path consists of making portfolio duration equal to the investor's horizon planning period. The model is then extended to include transaction costs. The resulting optimal portfolios are no longer consistent with Khang's dynamic immunization theorem. In fact, the strategy for constructing the optimal portfolio consists of initially choosing a portfolio with a duration that is smaller than the horizon planning period.


Asset Allocation In Investing To Meet Liabilities, Anthony Dardis, Vinh Loi Huynh Jan 1996

Asset Allocation In Investing To Meet Liabilities, Anthony Dardis, Vinh Loi Huynh

Journal of Actuarial Practice 1993-2006

We present some rudimentary concepts on asset/liability management and describe an approach to asset allocation modeling for institutions that invest to meet liabilities. The traditional risk/reward framework of financial economics is used as a starting pOint. The definitions of risk and reward are then refined with regard to the institution under consideration. A simple model of a U.S. life office is examined. We assume that the only investments available are domestic stocks and long-dated government bonds. Stochastic simulation is used to create a large number of future investment scenarios using historical total return data for these asset ...


Actuarial Conservatism: Not In Public Sector Defined Benefit Pension Plans, Brian A. Jones Jan 1995

Actuarial Conservatism: Not In Public Sector Defined Benefit Pension Plans, Brian A. Jones

Journal of Actuarial Practice 1993-2006

Most actuaries tend to be conservative, and most, including this writer, probably would be happy to be so categorized. But actuarial conservatism may not be the best rule in defined benefit public sector pension plans. This paper argues that it is not appropriate for actuaries to employ conservatism assumptions in such public sector plans.


A Critique Of Defined Contribution Plans Using A Simulation Approach, David M. Knox Jan 1993

A Critique Of Defined Contribution Plans Using A Simulation Approach, David M. Knox

Journal of Actuarial Practice 1993-2006

During the 1980s there was a trend in many countries away from defined benefit plans toward defined contribution plans. This development means that the individual member bears the full investment risk in the preretirement period and the annuity rate risk at retirement, as no pension benefit (expressed as a percentage of salary) is provided. This paper, through the use of a stochastic model for both inflation and a range of investment returns, analyses the distribution of retirement incomes that will be produced from a defined contribution plan. The impacts of changing entry and exit ages, different investment strategies, alternative career ...