We study how risk management through hedging impacts firms and competition among firms in the life insurance industry - an industry with over 7 Trillion in assets and over 1,000 private and public firms. We show that firms that are likely to face costly external finance increase hedging after...

We study the impact of financing constraints on corporate risk management. Using data on credit scores matched with unique information on firm level commercial insurance purchases, we find that financing constraints lead to higher insurance spending. We adopt a regression discontinuity design...

The failure of financial institutions is often depicted as an externally-driven event in which certain triggers almost inevitably lead to the collapse of the firm. In contrast, this paper views institutional failure as a multistage process in which precautionary measures taken by the firm can...

We present a model for P/L insurance companies based on Asset-Liability-Management (ALM). We show analytically for multivariate normal distributed assets and claims that an overall minimum of the required risk capital can be obtained by refining the firm's asset allocation when including a ruin...

Since 2008, catastrophic losses and financial turmoil have deeply shaken the insurance and reinsurance industries. Severe difficulties encountered by sector leaders like AIG and Swiss Re have shed light on the potential fragility of the players, and have increased attention on the subject of...

Catastrophe insurance markets have changed beyond recognition since the sudden upturn in claims beginning in 1966. There is now a growing tendency for risk manager to bypass traditional insurance markets, and a variety of instruments designed directly to transfer risk to the financial markets....

Despite the use of VaR as a means to control risk, using VaR can have the opposite effect. VaR is used by bank and insurance regulators more than any other risk measure. A value-at-risk (VaR) constraint on the probability that future firm equity value will be less than a floor, when the floor is...

We consider a risk sharing problem in which agents pool their random costs together and seek an allocation rule to redistribute the risk back to each agent. The problem is put into a cooperative game framework and we focus on two salient properties of an allocation rule: stability and...

We examine the problem of decision making using a probabilistic model when there is material uncertainty concerning the accuracy of the model coupled with limited information about it. Such conditions could hold, for example, for the user of a complex commercial model of natural catastrophe...

This paper provides a closed-form Value-at-Risk (VaR) for the net exposure of an annuity provider, taking into account both mortality and interest-rate risk, on both assets and liabilities. It builds a classical risk-return frontier and shows that hedging strategies -- such as the transfer of...