Journal of Insurance and Finance 2021 KCI Impact Factor : 0.67

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pISSN : 2384-3209

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2010, Vol.21, No.2

  • 1.

    A Mortality-Risk hedging Portfolio Strategy in Whole-Life Insurance and Annuity

    Sung Jooho | 2010, 21(2) | pp.3~36 | number of Cited : 4
    Abstract PDF
    The demand for a whole life annuity in pursuit of planning for one’s retirement has been gradually increasing in Korea, and this is rooted in the prolongation of average lifespan. However, this trend is not reflected in the assumed mortality, which is used when designing insurance products. In this study, we first examined mortality, survival, and longevity risks based on the mortality rate changes. Subsequently, we suggested the actuarial gain and loss inherent to a product design through an actuarial model by considering the rate changes both in ordinary mortality rate and annuity mortality rate based on the Lee-Carter model. In the case where both mortality coverage and survival coverage are included in one product, we proposed a mechanism to hedge the aggregate survival-mortality gain and loss adjusted through the mortality coverage benefit to survival coverage benefit ratio in a given period. Furthermore, we suggested a measure to achieve gain and loss management goals of insurance providers by establishing different mortality coverage benefit to survival coverage benefit ratio in order to offset the aggregate survivalmortality gain and loss variable in accordance with the mortality coverage period through our model discussed above. Finally, we emphasized the importance of establishing the assumed interest rate by presenting the aggregate gain and loss estimates as a result of effective interest rate following product management under the assumption that prospective improvement in the mortality rate is guaranteed. In conclusion, the mortality coverage benefit to survival coverage benefit ratio to make the aggregate survival-mortality gain and loss zero in this study was approximately “52.74792 to 1”in one product, and this ratio varied according to the term unredeemed. In addition, the ratio when two products exist was approximately “10.59732 to 1”. Therefore, insurance providers must perform product management with the improvement in mortality rate through internal hedging strategies taken into account in order to lead a successful business. In addition, they must pursue complete hedging by predicting future market environment and establishing an appropriately assumed interest rate.
  • 2.

    On Enlarging the Insured Rate of Physical Damage Coverage by Analysing the Characteristics of Customers

    Kee-Hoon Kang , 기승도 | 2010, 21(2) | pp.37~72 | number of Cited : 1
    Abstract PDF
    As the growth of the number of registered vehicles has been stagnant, so has auto insurance. The number of registered vehicles is an exogenous variable that cannot be controlled by the insurer. Thus, the auto insurer can enlarge total written premiums and market size by introducing some new coverages or increasing the insured rate of existing coverages. Compared to other types of coverages, the insured rate of the collision coverage is still low but the premium size per vehicle is relatively large. Therefore, under current market condition of the auto insurance, increasing the insured rate of collision coverage would be crucial to enlarge total auto insurance market. In this paper, we analyze characteristics of the auto insured who do not purchase collision coverage by utilizing a generalized additive partial linear model. We also suggest a couple of ways to increase the insured rate of collision coverage.
  • 3.

    A Study on Technical Efficiency of Retirement Pension Business

    김재현 | 2010, 21(2) | pp.73~102 | number of Cited : 2
    Abstract PDF
    Since the Retirement pension system was introduced in 2005, retirement pension providers have been heavily competing in order to increase their market shares. In the mean time, mostly due to lack of available data, empirical research, which may provide the guidelines for the competitiveness of the pension providers has been lagged behind. In an effort to partly resolve the problem, this paper empirically analyzed the technical efficiency of pension providers' retirement pension business using DEA. The empirical results show that several small retirement pension providers can gain efficiency through their low inputs, especially in labor, while large ones suffer from the severe market share competition. However, the other result using the management fees as output measure shows that some of the large pension providers operate more efficiently, while the others exhibit economies-ofscale. This means that pension management fees are considerably discounted under the rational level due to the over-competition or market practices.
  • 4.

    On Wealth Management of Insurance Company

    Ick Jin , Dong-Gyum Kim | 2010, 21(2) | pp.103~145 | number of Cited : 2
    Abstract PDF
    In spite of its great importance and growth potential, wealth management service in Korea has been supplied insufficiently. In particular, domestic insurance companies have not actively participated in its market due to unsatisfactory development of adequate business models and unfavorable regulations compared to the financial institutions in different financial sectors. Currently, they are seeking for a business model incorporated with the service, in which they themselves provide a financial investment program. However, this business model would be quite different from those of global insurance companies, actively operating with wealth management services. In this study, therefore, we suggest it is necessary to understand asset management services as a broad concept over financial investment services. We propose insurance trust programs as services to ensure the competitiveness of insurance companies, and analyze the strategies of insurance companies to offer them effectively. The main results are: the incentives of insurance companies to expand wealth management services are increasing. They are more likely to choose a in-house model at the initial stage with high marginal costs. An arm's length affiliate model, however, is more beneficial if marginal costs are low by building infrastructure. Moreover, they are induced to utilize external network connected with solicits, agency, and bancassurance channel, providing insurance trust programs.
  • 5.

    Reexamination of Forward Premium Anomaly in Foreign Exchange Markets Allowing for Realized Volatility and Jump Process

    Han, Young Wook | 2010, 21(2) | pp.147~174 | number of Cited : 0
    Abstract PDF
    By using the daily Euro-Dollar and Yen-Dollar spot and overnight forward exchange rates, this paper reexamines the issue of the forward premium anomaly which has attracted widespread attention in international finance. In particular, this paper investigates a statistical evidence for the role of realized volatility and jump process in the tests of the anomaly, which have mostly ignored in the previous studies. For the purpose, this paper adjusts the usual regression model of testing the forward premium anomaly by allowing for realized volatility and jump process. After reestimating the adjusted regression model, this paper finds that the estimated value of the forward premium coefficient in the Yen-Dollar currency market is positive while the coefficient in the Euro-Dollar currency market is still negative yet reduced significantly. Thus, this paper presents the possibility that the empirical phenomenon of the forward premium anomaly in foreign exchange markets may not be as robust as the previous studies have presented if the regression models used in those studies are specified more appropriately by allowing for the realized volatility and the jump process.
  • 6.

    The Asset Price and Investment Technology

    유진아 | 2010, 21(2) | pp.175~215 | number of Cited : 0
    Abstract PDF
    This paper evaluates the importance of investment installment costs in a sticky price model by comparing two different adjustment cost specification:one depends upon investment-to-capital stock ratio, and the other depends upon investment growth. The two specifications are considered since the former has been adopted in the empirical literatures and the latter has been adopted in the theoretical literatures. The adjustment cost specifications affects the relationship between asset price and value of capital stock, and also the dynamic process of investment and output. When the installment cost depends upon the investment growth, there is a stronger positive asset price response to a positive technology shock. In addition the investment growth specification generates a hump-shaped response of investment and output, that is frequently observed in the empirical literatures.