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Full-Text Articles in Insurance
The Paradox Of Insurance, Gideon Parchomovsky, Peter Siegelman
The Paradox Of Insurance, Gideon Parchomovsky, Peter Siegelman
All Faculty Scholarship
In this Article, we uncover a paradoxical phenomenon that has hitherto largely escaped the attention of legal scholars and economists, yet it has far-reaching implications for insurance law: loss-creation by uninsured parties caused by the presence of insurance. Contrary to the conventional wisdom, we show that insurance can create significant negative externalities by inducing third parties to engage in antisocial, illegal and unethical activities in order to extract money from insureds or insurers. Moreover, as the amount and scope of insurance grows, so does its distortionary effect on third parties. We term this phenomenon the paradox of insurance. The risk …
Private Equity Value Creation In Finance: Evidence From Life Insurance, Divya Kirti, Natasha Sarin
Private Equity Value Creation In Finance: Evidence From Life Insurance, Divya Kirti, Natasha Sarin
All Faculty Scholarship
This paper studies how private equity buyouts create value in the insurance industry, where decentralized regulation creates opportunities for aggressive tax and capital management. Using novel data on 57 large private equity deals in the insurance industry, we show that buyouts create value by decreasing insurers' tax liabilities; and by reaching-for-yield: PE firms tilt their subsidiaries' bond portfolios toward junk bonds while avoiding corresponding capital charges. Previous work on affiliated or "shadow" reinsurance and capital management misses the important role that private equity buyouts play as recent drivers of these phenomenon. The trend we document is of growing importance in …
Covid-19 Business Interruption Insurance Losses: The Cases For And Against Coverage, Christopher French
Covid-19 Business Interruption Insurance Losses: The Cases For And Against Coverage, Christopher French
Journal Articles
The financial consequences of the government-ordered shutdowns of businesses across America to mitigate the COVID-19 health crisis are enormous. Estimates indicate that small businesses have lost $255 to $431 billion per month and more than 44 million workers have been laid off. When businesses have requested reimbursement of their business interruption losses from their insurers under business interruption policies, their insurers have denied the claims. The insurance industry also has announced that business interruption policies do not cover pandemic losses, so they intend to fight COVID-19 claims “tooth and nail.” More than 450 lawsuits throughout the country already have been …