Journal of Insurance and Finance 2021 KCI Impact Factor : 0.67

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pISSN : 2384-3209

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2013, Vol.24, No.2

  • 1.

    Measuring Insurance Risk of Using a Collective Risk Model

    조용운 , 조재린 | 2013, 24(2) | pp.3~35 | number of Cited : 4
    Abstract PDF
    In this paper, we measure the risk multipliers of health insurance of the four largest casualty insurance companies using their payment data from FY 2006 to FY 2010. To this end, we apply the collective risk model, and estimate the uncertainty of the parameters required for this model using the method proposed by the International Actuarial Association(IAA), along with the conventional method. The conventional method estimates uncertainty parameters with the annual variations of payment data whereas the IAA method adopts loss ratios and inflation rates. As a consequence, we find that the risk multipliers calculated by the conventional method with real value data are larger than those of the IAA method. This is because the trends in the and of health insurance overstate the uncertainty parameters, implying that the trends, if any,might lead the conventional method to encounter model error risk. In the IAA method, on the other hand, the uncertainty parameters are not directly affected by the trends in payment data. Nonetheless, a shortcoming of the IAA method is to assume that the uncertainty parameters in severity depend only on the variation in inflation. As such, this method does not reflect changes in public health insurance policy, and thus might be more appropriate in the absence of such significant changes.
  • 2.

    Empirical Study on the Payout Choices of Tax-Qualified Individual Annuities in Korea

    Lee Kyonghee | 2013, 24(2) | pp.37~69 | number of Cited : 4
    Abstract PDF
    We analyze the payout choices (lump sum, annuity certain, life annuity, waiting) and determinants of annuitization in tax-qualified individual deferred annuities sold from June 1994 to December 2000 in Korea. Of the 8,402 individual annuities reaching maturity between 2008and 2011, 78.9 percent elected life annuity, 6.0 percent elected annuity certain, 4.9% percent chose lump-sum withdrawal, and the remaining 10.1 percent chose waiting. Three factors explain the high annuitization rate in the sample data: the role of public pensions and occupational pensions in the provision of old age income, behavioral factors (tax incentives and default options in the payout phase), and the price of life annuities. Among these factors, price is assumed to be a major factor. Our results from the empirical analysis show that for a female, a guarantee of the reinvestment risk increases the probability that the policyholder will choose a life annuity compared to lump-sum withdrawal. Also, an increase in accumulated assets makes it more likely an individual will choose a life annuity over the lump-sum.
  • 3.

    Bayesian Inference of a Mixture Model with Extreme Value Distributions in Korean Medical Insurance Applications

    Jae Hoon Jho , 이근창 | 2013, 24(2) | pp.71~98 | number of Cited : 6
    Abstract PDF
    In this paper, we introduce a practical method of estimating the threshold over which a heavy-tailed distribution is approximated asymptotically for the underlying distribution of extreme events. We introduce a mixture model of a loss distribution of a certain parametric form below a threshold and a heavy-tailed distribution above the threshold. The number of exceedances over a threshold are considered a random variable for a prior distribution in the Bayesian framework in order to estimate the threshold and corresponding extreme value index. A numerical example is given to illustrate the Bayesian estimation of the parameters by applying the mixture model to losses in medical insurance policies in Korea. About a 10.5% extra charge over traditionally calculated premiums seems necessary to hedge the risk embedded in the heavy-tailed loss distribution.
  • 4.

    Price Discovery in the Limit Order Book of KOSPI 200 Futures on CME Globex

    woobaiklee , Min Cheol Woo | 2013, 24(2) | pp.99~139 | number of Cited : 2
    Abstract PDF
    The trading of KOSPI 200 futures, the limit order book plays a significant role in providing liquidity on this electronic derivatives market. This paper presents the informational content of price discovery and the pattern of liquidity provision in the limit order book of KOSPI 200 futures listed on the CME Globex spanning a sample period from January 2011 to November 2011. Trading of KOSPI 200 futures on the CME Globex platform, which was launched in November 2009, starts at 18:00 and closes at 05:00 the next morning. Using the Vector Error Correction Method to estimate the “information share” of quotes as suggested by Hasbrouk (1995), we find the best quotes contribute more to price discovery than limit orders from 2 to 5. Furthermore, we find that aggressive limit orders are more informative than best quotes in the price discovery process. The information share of best quotes is concentrated at the opening and closing of trading, which resembles a “U-shaped“pattern. In contrast, contributions of the remaining quotes from the limit order book to the price discovery process show a “reversed U-shaped” pattern during the trading session. Our results suggest that informed traders seem to submit limit orders strategically,discriminating between best quotes and other remaining quotes in the limit order book within the trading day.
  • 5.

    A Study of the Guaranteed Lifetime Withdrawal Benefit in Variable Annuities

    김융희 , Kim, Changki | 2013, 24(2) | pp.141~172 | number of Cited : 1
    Abstract PDF
    The Guaranteed Lifetime Withdrawal Benefit (GLWB) allows minimum withdrawals from an invested amount in an annuity without having to annuitize the investment. The amount that can be withdrawn is based on a percentage of the total amount invested in the annuity. In addition, the GLWB is valuable in that it can induce consumers to purchase a variable annuity to provide for old age by providing death benefits and flexible liquidity. However, GLWB providers are exposed to high risk since they have liability to provide the annuity even after the annuity holders’ reserves become exhausted. Therefore, the appropriate pricing of GLWBs is crucial. In this study, we projected stock returns using the regime switching log normal model (RSLN) in consideration of the long maturity of the GLWB and estimated the survival rate using the Lee-Carter model to reflect the high longevity risk of option providers. After setting the assumptions, we priced the GLWB option price according to the formula. Moreover, we analyzed the effect of major assumptions such as stock volatility and survival rate on the guarantee risk of GLWB providers and proposed a product design to reduce the guarantee risk.