Abstract
The marketplace in which property—liability insurers operate has become increasingly risky. Recent years have witnessed price competition far more demanding than any experienced since the formation of the insurance cartels earlier in this century. Historically, high interest rates have led to intense competition among insurers for investable funds coupled with demands by policyholders to be given credit for interest on funds held in reserves. The insurance sector has experienced higher inflation than the economy as a whole due to liberalization of jury verdicts, broadened interpretations of contractual terms, and other factors (see Cummins and Nye, 1981). Losses on long-tail lines have become less and less predictable. These forces have increased the volatility of underwriting profits, made insurers more vulnerable to potential financial difficulties, and increased the risk of insolvency.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Beard, R.E., T. Pentikainen, and E. Pesonen. Risk Theory. Third edition. New York: Chapman and Hall, 1984.
Buhlmann, Hans. Mathematical Methods In Risk Theory. New York: Springer-Verlag, 1970.
Cummins, J. David. “Risk-Based Premiums for Insurance Guaranty Funds.” Journal of Finance 43 (1988).
Cummins, J. David, and David J. Nye. “The Stochastic Characteristics of Property—Liability Insurance Profits.” Journal of Risk and Insurance 47 (1980): 61–80.
Cummins, J. David, and David J. Nye. “Inflation and Property—Liability Insurance.” In John D. Long (ed.), Issues In Insurance. Vol. 2, second edition. Malvern, PA: American Institute for Property—Liability Underwriters, 1981.
Cummins, J. David, and Laurel Wiltbank. “Estimating the Total Claims Distribution Using Multivariate Frequency and Severity Distributions.” Journal of Risk and Insurance 50 (1983): 377–403.
Cummins, J. David, and Scott Harrington. “Property—Liability Insurance Rate Regulation: Estimation of Underwriting Betas Using Quarterly Profit Data.” Journal of Risk and Insurance 52 (1985): 16–43.
Gerber, Hans U. An Introduction to Mathematical Risk Theory. Philadelphia: S. S. Huebner Fondation, University of Pennsylvania, 1979.
Harrington, Scott E., and Jack Jelson. “A Regression Based Methodology for Predicting Property—Liability Insurance Company Insolvency.” Working paper, Center for Research on Risk and Insurance, University of Pennsylvania, 1984.
Ibbotson, Robert, Rex Sinquefield, and Laurence Siegel. “Historical Returns on Principal Types of Investments.” Working Paper No. 71, Center for Research in Security Prices, University of Chicago, 1982.
Jarrow, Robert A., and Andrew Rudd. Option Pricing. Homewood, IL: Richard D. Irwin, 1983.
Karline, Samuel, and Howard Taylor. A Second Course In Stochastic Processes. New York: Academic Press, 1981.
Kraus, Alan, and Stephen A. Ross. “The Determination of Fair Profits for the Property—Liability Insurance Firm.” Journal of Finance 37 (1982): 1015–1028.
Merton, Robert. “An Analytic Derivation of the Cost of Deposit Insurance and Loan Guarantees: An Application of Modern Option Pricing Theory.” Journal of Banking and Finance 1 (1977): 3–11.
Merton, Robert. “On the Cost of Deposit Insurance When There Are Surveillance Costs.” Journal of Business 51 (1978): 439–452.
National Association of Insurance Commissioners. Using the NAIC Insurance Regulatory Information System: Property and Liability Edition. Kansas City, MO, 1984.
National Committee on Insurance Guaranty Funds. “Special NCIGF Report: State Insurance Guaranty Funds and Insurance Company Insolvency Assessment Information.” Schaumburg, IL, 1984.
Pentikainen, Teivo (ed.). Solvency of Insurers and Equalization of Reserves. Vol. 1. Helsinki: Insurance Publishing Co, 1982.
Pinches, George, and James Trieschmann. “The Efficiency of Alternative Models for Solvency Surveillance In the Insurance Industry.” Journal of Risk and Insurance 41 (1974): 563–577.
Roy, Yves, and J. David Cummins. “A Stochastic Simulation Model for Reinsurance Decision Making By Ceding Companies.” In J. David Cummins (ed.), Strategic Planning and Modelling In Property—Liability Insurance. Hingham, MA: Kluwer-Nijhoff, 1985.
Sheffrin, Steven M. Rational Expectations. New York: Cambridge University Press, 1983.
Smith, Clifford W., Jr. “Option Pricing: A Review.” Journal of Financial Economics 3 (1976): 3–51.
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 1988 Springer Science+Business Media New York
About this chapter
Cite this chapter
Cummins, J.D. (1988). Incorporating Risk in Insurance Guaranty Fund Premiums. In: Borba, P.S., Appel, D. (eds) Workers’ Compensation Insurance Pricing. Huebner International Series on Risk, Insurance, and Economic Security, vol 7. Springer, Dordrecht. https://doi.org/10.1007/978-94-015-7789-2_8
Download citation
DOI: https://doi.org/10.1007/978-94-015-7789-2_8
Publisher Name: Springer, Dordrecht
Print ISBN: 978-90-481-5816-4
Online ISBN: 978-94-015-7789-2
eBook Packages: Springer Book Archive