The Journal of Risk Management and Insurance
Papers are published in English, usually twice a year in June and December. All articles are freely accessible on the journal's website, and no submission fee is required.
Upon acceptance, the author(s) agree to transfer the copyright to their work to the Assumption University of Thailand, which owns the journal, royalty-free, for the sole purpose of academic publishing. The author(s) retain the right to self-archive the published paper, print copies for their personal use provided they will not be sold commercially, and use it for their future work provided the published article is properly cited.
How Important is Liquidity to Accessing ILS Capital for Cyber Re/Insurance Risk Transfer?
The insurance linked securities (ILS) market has long been seen as a potential participant in cyber insurance and reinsurance (“re/insurance”) risks. ILS managers have long clamored for access to liquid cyber re/insurance instruments and indicated that liquidity would be crucial to scaling their involvement. The issuance of the first cyber catastrophe bonds came alongside first-of-its-kind qualitative research on the importance of liquidity to ILS managers with regard to their prospective participation in the cyber ILS market. This paper makes a unique contribution to the literature by analyzing the views of cyber ILS managers with regard to the need for liquid instruments and then linking those findings to the early cyber catastrophe bond activity of 2023 and 2024.
Copyright (c) 2025 The Journal of Risk Management and Insurance
Empowering Insurance Consumers in Nigeria: Exploring the Interplay between Financial Literacy, Trust, and Decision-Making
This study examines the interplay between financial literacy, trust, and insurance decision-making among consumers in Nigeria. Despite the growing insurance market, penetration rates remain low, often attributed to limited financial literacy and distrust in insurance providers. Utilizing a survey research design, data was collected from 384 respondents in Lagos State, Nigeria. The study employed multiple regression analysis to assess the effects of financial literacy and trust on consumers' perceived value of insurance. The results reveal that financial literacy, encompassing general financial knowledge, insurance knowledge, and understanding of risk and policy terms, significantly influences insurance decision-making (p < 0.05). Trust in insurance providers, defined through competence, integrity, benevolence, reliability, and transparency, also shows a positive impact on consumer decisions (p < 0.05). The model demonstrated that both factors jointly account for a significant portion of the variance in perceived insurance value (R² = 0.259; F = 26.572, p = 0.000 for financial literacy predictors; R² = 0.157; F = 14.137, p = 0.000 for trust predictors). The findings suggest that enhancing consumer education and fostering trust through transparency and ethical practices can lead to increased insurance uptake in Nigeria. This study contributes to the existing literature by providing a multidimensional analysis of trust and its effects on consumer behavior, particularly within the context of a developing economy.
If Cyber Is Uninsurable, the United States Has a Major Strategy Problem
The latest US national cyber security strategy makes a brief but important mention of the role of insurance in protecting the nation from cyber risks. This has become a salient reliance on an unpredictable actor, given the constraints on capital in the global cyber insurance market. While insurers have become more comfortable with cyber risk, there are still elements of it with which they are uncomfortable, particularly systemic and catastrophic risks. Unless insurers can find a way to get comfortable with systemic risk, there will remain a crack in the economic security elements of national cyber security strategy – in the United States and around the world. In order to meet the strategic expectations of the United States, the cyber market will need to continue its growth trajectory, with fresh sources of capital the key to successfully doing so.
Copyright (c) 2024 The Journal of Risk Management and Insurance
Assessing the Risk Contribution of Gross Claims from different Lines of Businesses within the Nigerian Insurance Sector
At the industry-level, premiums and claims are realized from different lines of insurance businesses. Although the premiums are used by the government and other stakeholders to promote economic growth, the frequency and volume of claims accumulated can drastically impede this growth. Hence in this paper, we consider gross claims from six lines of insurance businesses at the macro-scale drawn from a two-year company-based series. We further assume that they form a portfolio of industry-level gross claims and use the total gross claims as a proxy for the claims market. The Capital Asset Pricing Model is then applied to estimate the degree of risk contributed by each line of business to the portfolio based on the linear regression technique. As a measure for comparison, a multiple linear regression model that incorporates size and value, which are proxied by gross premiums and claims ratio, is employed. The specific and systematic risks are estimated and an optimization operation on the gross claims, using simulated data, is performed. The findings show that the oil&gas line of business displays the highest sensitivity with the claims market and hence possesses the largest systematic risk, while engineering displays the lowest sensitivity. From the optimization analysis, the simulated industry portfolio with the highest expected claim has its highest weight assigned to oil&gas. This industry-level analysis, with its added policy implications, can serve as a benchmark for individual insurance companies in Nigeria who cover multiple lines of insurance policies.
The future of the cyber insurance and reinsurance market is uncertain, as is the case for any new and emerging market. A lack of historical data and experience constrain the analysis needed to support growth. Further, the prospect of fresh capital from the insurance linked securities (ILS) sector is constrained by a number of practical factors. Among the most important, though, is one that is nearly impossible to prove: the extent to which cyber risks are correlated with financial markets. It is an article of faith, and one that lacks clear consensus in the ILS market. If cyber is not correlated with financial markets, gaining adoption of that view could mean a significant influx of risk capital to support a new and expanding market. However, if the contrary becomes the dominant narrative, future cyber market growth could become slow and difficult to attain. Absent the ability to prove the negative, this article features makes an original contribution to the literature by presenting the findings of interviews with leading ILS managers on their views regarding the extent to which cyber risk is correlated with financial markets. The result is a new perspective on how to fuel cyber re/insurance growth.
Information Asymmetry in Insurance Contracts and “the Weaker Party”
Adverse selection for insurers which arises due to asymmetric information in the insurance market is unquestionably a barrier for efficient insurance contracts. The insurance economics literature postulates that the insurance company suffers from a lack of information which can be harmful to its financial health. In Carter v. Boehm (1766) 97 E.R. 1162 which formulated the concept of good faith, the C.J. Lord Mansfield, observed that “in insurance contracts good faith forbids either party by concealing what he privately knows, to draw the other into a bargain from his ignorance of that fact, and his believing the contrary”. This article examines the contractual duty of good faith disclosures in life and health insurance during contract negotiations in the law of India. The findings underline significant problems in regard to insurability resulting from information asymmetry between the parties and inaccurate risk assessment. It is asserted that the focus should be on establishing a balanced regime which protects the interests of both the insured and insurer. In conclusion this would lead to some concrete suggestions for more deliberation.
Copyright (c) 2023 The Journal of Risk Management and Insurance
Loss Prevention Technologies' Effect on Property Damage Cost and Financial Savings
This paper presents an analysis of loss prevention technology investments across more than 4,000 buildings owned by Danish municipalities to estimate the financial returns from such investments. The study finds that while these technologies significantly reduce the cost of damage, the expected savings are insufficient to finance the investment or operation costs. Therefore, it is important to consider non-property or non-physical damage, such as business interruptions, when making investment decisions to determine if the full gains from the investments exceed the cost.
Lifecycle Consumption and Life Insurance
The aim of this research is to analyze, in a systematic manner, the literature on the consumer behavior and the impact of life insurance in the lifecycle scenario, to which for the consumer, the possibility to be able to use particular financial products has been added. This work uses a framework based on four stages and to process the systematic literature review (SLR) we employ the Tranfield approach in order to provide an efficient and high-quality method for identifying and evaluating extensive studies. The methodology was pursued step by step, analyzing keywords, topics and journal quality to arrive at a set of relevant papers that was analyzed in detail to evaluate the methods employed and results obtained. Through our research method, we selected 33 relevant articles, from which it emerged that consumer behavior depends on risk attitude, ageing and, hence, longevity and brevity risk. The results suggest that various types of life insurance and particular types of financial products (e.g. annuities, tontines and tounity) are used, all with the aim of eliminating these risks. On the other hand, the use of the various types of financial products might be a good choice to ensure flatter individual consumption, because it eliminates longevity and brevity risk. The importance of the study is to provide readers with a framework for the context analyzed. Based on the findings, this study concludes with some implications that aim to explain consumer behavior.
Prediction of the Cedent's Loss Reserve Under Some Reinsurance Treaties
This article examines the impact of some traditional reinsurance treaties on the loss reserve of the ceding company. More precisely, it considers quota share treaty, surplus treaty, excess-of-loss treaty, and two combinations of them. Then, it develops a theoretical foundation for predicting the cedent's loss reserve and evaluating such prediction using the mean square error of prediction. The application of our findings has been given for a car collision insurance loss portfolio. Moreover, the impact of such reinsurance treaties on the variability of the cedent's loss reserve has been investigated through a simulation study.
Underwriting Capacity, Carbon Footprint and Performance of Quoted Insurance Firms in Sub-Saharan African Countries
In this study, the effects of underwriting capacity and carbon footprint on the financial performance of listed insurance firms in selected sub-Saharan African countries was investigated. It is argued in the study that both internally controlled factors (underwriting capacity) and factors that are external to the insurance industry (carbon footprint) generate or intensify risks faced by the insurance firms. The study employs secondary data collected from the sampled insurance firms' annual audited financial statements. Data used involves forty-five (45) insurance firms in eight (8) selected sub-Saharan African countries for the period of 2010 to 2019. To present a robust outcome in the relationships, a dynamic estimation procedure was adopted based on System Generalized Method of Moments estimation technique using dependent variables (Return on Asset, Return on Equity and Tobin’s Q), explanatory variables (shareholders fund, underwriting profit, reserves, earning asset ratio, gross premium, the ratio of ceded reinsurance and Carbon dioxide emission) and moderating variables of firm’s size, economic growth and inflation rate. The results from the study reveal that the pattern of effects of underwriting capacity or carbon footprints differ in terms of the factors considered or the measurement used for a performance indicator. In particular, the study found that shareholders' funds, underwriting profit, reserves, earning asset ratio and gross premium written exert significant effects on the performance of the insurance firms, although the effects vary depending on whether Return on Asset, Return on Equity or Tobin's Q is used as a performance indicator. The study also finds that the level of carbon footprint in the economy exerts significant negative effects on all the performance indicators of insurance firms. The study recommends optimal risk and shareholder's fund management strategies, as well as sustainable insurance procedures.
Copyright (c) 2022 The Journal of Risk Management and Insurance
Cyber ILS: How Acute Demand Could Drive a Scalable Retro Market
Increasing demand for cyber re/insurance and a shortage of supply have made the need for fresh risk capital acute. After years of seeking support from the insurance linked securities (ILS) market, re/insurers may be on the brink of a major change. PCS has conducted original research with 24 ILS funds representing nearly 80% of the sector as measured by assets under management. ILS appetite for cyber re/insurance risk has increased, with many funds interested in entering the market this year. Historical barriers such as structure and modeling may not be as problematic as they were in the past, and narrowing spreads on cyber ILS have made the risk more attainable for providers of collateralized protection. Market dynamics have pushed pricing to levels that ILS funds can reasonably contemplate, which means that scale may soon follow.
Micro Insurance Schemes and Insurance Penetration in Nigeria
Over the years, the contribution of the insurance sector to the GDP of Nigeria, measured by insurance penetration rate, has been consistently less than one percent which, no doubt, is unimpressive. This unimpressive performance calls for sustainable and practicable strategies that can increase insurance penetration in Nigeria. This study thus examines micro-insurance schemes as a veritable strategy to increase insurance penetration in Nigeria. Using an integrative literature review method, the study among other relevant concepts discussed the micro-insurance ecosystem in Nigeria as well as the opportunities and barriers to the effectiveness of micro-insurance as a tool to increase insurance penetration in Nigeria. Findings indicate that stakeholders in Micro-insurance market can take advantage of the demographic outlay of Nigeria, existence of favourable regulatory environment and technological innovations through insurtech to increase insurance penetration with micro-insurance schemes. However, to eliminate barriers to the effectiveness of micro-insurance market, stakeholders are to conduct programmes that will increase awareness level of micro-insurance schemes in Nigeria and invest in market research to support the development of schemes that suits the needs of the target customers.
Economic Capital Determination for Non-Life Insurance Using Copulas
In the light of the not-too-distant ago financial crisis that brought the interconnectedness of financial risks into focus, this paper set out to evaluate the economic capital of the non-life insurance industry in Ghana by evaluating the total risk exposure of the industry via value at risk and conditional value at risk. The paper employed the copula-based ARMA-GARCH model on quarterly premium, claims and asset data of the Ghanaian non-life insurance industry spanning the period 2012Q4 to 2020Q4. All lines of business in the non-life insurance industry in Ghana were considered and predictions were made for the next 8 quarters of the data. It was found that over the quarters in 2021 and 2022, there is a 5% chance that in each quarter the industry will lose more than 64% of its entire portfolio and that should extreme events trigger such losses then it should be expected that losses will amount to about 80% of the industry portfolio. It was further found that there is a 1% chance in each of the quarters from 2021 to 2022, that the non-life insurance industry’s portfolio will be wiped out. Such an event, though as remote as 1 out of 100, can have dire consequences for the economy and financial sector and therefore the non-life insurance industry is one area of the Ghanaian financial sector that must be closely monitored to avert any such catastrophe.
Life-cycle Consumption in the Presence of Term Life Insurance, Voluntary, Altruistic Bequest, and Uncertain Life Span
In this paper, we extend the inter-temporal consumption model of Yaari in an asymmetric framework with market incompleteness, where agents can only take a long position in life insurance. We study consumption and saving behaviour in the presence of voluntary bequest concerns and term life insurance that can not be resold in the context of life expectancy uncertainty. We provide general insights that do not depend on specific forms of the utility function and risk aversion hypotheses. In particular, our results suggest that such policy leads to variable optimal consumption over time that is still affected by lifetime uncertainty.
Asset Liability Management and the Profitability of the Life Insurance Industry in Nigeria
This study is a panel data analysis of asset liability management and its effect on the profitability of life insurance companies in Nigeria. An inappropriate asset liability mix can be detrimental to the profitability of the organization. The objective of this study is to assess the relationship between assets, liabilities and profitability of life insurance companies in Nigeria. The expost facto research design is adopted and cross sectional data is sourced from ten life insurance companies covering years 2008-2019. Descriptive analysis and inferential statistics are carried out to test the suitability of the data for the study. Data are further subjected to the fixed effect and random effect regressions. Hausman test is carried out and the null hypothesis of a random effect model is rejected. The results reveal that assets largely have a statistically significant relationship with profitability, while some liabilities are significant. This provides evidence that profitability is associated with balance sheet items and a proper asset liability management has a direct effect on the overall profitability of the life insurance industry. It is therefore recommended that insurers should inculcate proper asset liability management policies and channel more of their resources to assets/liabilities which have the highest positive influence on profitability.
Copyright (c) 2021 The Journal of Risk Management and Insurance
A Review of Literature on the Life Insurance Business of Bangladesh and the Impact of COVID-19 Pandemic on the Industry
The people of Bangladesh are familiar with the life insurance policy from earlier to the birth of the country. But compared to the other Asian neighboring countries life insurance business in the country could not get much growth. Several researchers have extended their work to identify the problems and prospects of the business in the country. Most of them have identified unawareness of the people of the country regarding life insurance policy as one of the reason behind the slow growth of the business. COVID-19 pandemic has put the life of people in more uncertainty. This may lead to a change in the attitude of the people of the country toward life insurance in the future. The aim of the study is to present a comprehensive review of the earlier works that has been done to portray the problems and prospects of the life insurance industry of Bangladesh. It also reviews the information related to the impact of COVID-19 pandemic on the life insurance industry of Bangladesh and reveals that the post COVID-19 pandemic period can be considered as a high time for creating awareness among the people of the country regarding life insurance policy. This study will be helpful for the future researchers and the policy makers to focus on issues essential for growth of the life insurance industry of the country in a post COVID-19 pandemic world.
Lower and Upper Bounds of the Ultimate Ruin Probability in a Discrete Time Risk Model with Proportional Reinsurance and Investment
The lower and upper bounds of the ultimate ruin probability in a discrete time risk model with proportional reinsurance and investment are determined under the assumption that the reinsurance retention level and the amount of investment in a particular stock during each time period can remain constant by employing integral operator L. The lower bound is obtained from the finite time ruin probability that converges to the ultimate ruin probability with increasing time while the upper bound is iteratively determined by using Luesamai and Chongcharoen’s upper bound as the starting point. Besides, the ultimate ruin probability as a fixed point of L is illustrated.
Copyright (c) 2012 The Journal of Risk Management and Insurance
INSURERS INVOLVEMENT IN THE CONSEQUENCES OF GLOBAL WARMING
CHANGING TO ELECTRONIC BILL OF LADING BY A FREIGHT FORWARDER IN BANGKOK
THE RESPONSIVENESS OF INSURERS TO THE 2011 FLOODS IN THAILAND
ANALYSIS OF THE LIFE INSURANCE MARKET IN CHINA
INSURANCE INDUSTRY ACTIVITY AND ECONOMIC DEVELOPMENT IN THE ASIA-PACIFIC REGION
PREPARING INSURERS IN THAILAND FOR THE ASEAN ECONOMIC COMMUNITY
Copyright (c) 2013 The Journal of Risk Management and Insurance
ENHANCING SYNERGIES BETWEEN CONVENTIONAL INSURANCE AND TAKAFUL
WHAT IMPACT HAS SOMALIA PIRACY HAD ON MARINE INSURANCE?
THE INSURANCE INDUSTRY IN THAILAND, 2012
DISTRIBUTION CHALLENGES FACING THE INSURANCE MARKET IN KENYA