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Full-Text Articles in Insurance
Toward Better Management Of Flood Losses: Flood Insurance In A Wetter World, Michael K. Mcshane, Juita-Elena (Wie) Yusuf
Toward Better Management Of Flood Losses: Flood Insurance In A Wetter World, Michael K. Mcshane, Juita-Elena (Wie) Yusuf
Finance Faculty Publications
Flood is the most frequent and costly of U.S. natural disasters with losses expected to increase due to climate change. The National Flood Insurance Program (NFIP) mandates flood insurance purchase for properties with federally backed mortgages in the 100-year floodplain. We propose that mandatory flood insurance purchase be extended to all property in the 500-year floodplain. Following flood events, payments would be directly provided for more properties that suffer flood loss, reducing federal disaster aid spending. The mandate could put more pressure on local governments to increase their Community Rating System score, such as through infrastructure investments and management practices …
Risk Allocation Across The Enterprise: Evidence From The Insurance Industry, Michael K. Mcshane, Tao Zhang, Larry A. Cox
Risk Allocation Across The Enterprise: Evidence From The Insurance Industry, Michael K. Mcshane, Tao Zhang, Larry A. Cox
Finance Faculty Publications
Financial researchers initially regarded hedging activities as a means to reduce total firm risk, which often is defined in terms of cash flow volatility. More recently, researchers have focused on the strategic allocation of risk. Direct tests of risk allocation have been problematic, however, because hedging data are rarely available and, when available, are specific only to a single operation of the firm, such as bank lending. In this study, we exploit unique data from the insurance industry that allows us to observe hedging proxies for both investment and insurance underwriting risks and test the risk allocation hypothesis developed in …
Risky Asset Substitution In The Insurance Industry: An Historical Example, Brenda Wells, Karen Epermanis, Larry A. Cox, Michael Mcshane
Risky Asset Substitution In The Insurance Industry: An Historical Example, Brenda Wells, Karen Epermanis, Larry A. Cox, Michael Mcshane
Finance Faculty Publications
In the 1980s, life insurers sold guaranteed investment contracts (GICs) to pension plan sponsors, then backed these contracts with portfolios heavily weighted with higher risk assets such as common stocks and junk bonds. Ultimately this caused considerable loss, and history has repeated itself in many respects in recent years via holdings of equities and mortgage-backed securities. We evaluate the risky asset substitution in the life insurance industry from an historical perspective to determine if organizational form or other factors might be rationale for managerial decisions to engage in asset substitution. We find evidence that stock insurer managers are more likely …
Beware Of The Ides Of March: The Demise Of Hih Insurance, Bonnie Buchanan, Tom Arnold, Lance Nail
Beware Of The Ides Of March: The Demise Of Hih Insurance, Bonnie Buchanan, Tom Arnold, Lance Nail
Finance Faculty Publications
Despite differences in corporate governance systems in the United States and Australia, the corporate governance failures that led to each country’s largest bankruptcy are strikingly similar. WorldCom in the United States and HIH Insurance in Australia were both created by a rapid series of major acquisitions, failed after their last major acquisitions, and attempted to hide their declining performance with aggressive and/or fraudulent accounting practices. In this paper we present a clinical examination of the corporate governance failures that led to the demise of HIH Insurance and show that corporate governance failures are not endemic to the existing corporate governance …