Interface of insurance and banking in European countries

This thesis investigates one of the crucial issues currently facing the European financial institutions, in particular, banks and insurance companies. Currently in Europe, the banks are engaging into insurance business, and, the insurance companies, to a lesser effect, are engaging into banking business. These cross-business activities have broken down the long tradition of separation of these two financial industries, and have raised many questions. But there is little evidence on this issue, theoretically as well as empirically. This thesis is a kind of interdisciplinary approach and it has two parts. In the first part, the thesis examines various interfaces that exist between the European banks and insurance companies from two perspectives: banks' perspective as well as insurance companies' perspective. (Chapter two and three respectively). Based on industrial economic theory, organisation theory, the strategy & international business theory, and the regulation theory, a historical analysis is employed for the examination of these various interfaces. The thesis also examines the traditional relationships and traditional distribution channels of banks as well as insurance companies and the development of their current changing patterns. Driving forces for these changing interfaces and the regulation concerning changes of interface are also considered in the thesis (Chapter four). The EC Directives on banking and insurance are also given their due weight for this examination. One of the major contributions in the first part is to make a theoretical development of this new area, and the creation of 'bancassurance' and 'assurancebank' data that is scarce and can be invaluable for further research and development on this issue. Some of these data are used in the second part of the thesis. In the second part of the thesis, two sets of empirical tests are conducted. The first test is the test of return and risk effects on European bank holding companies diversification into various insurance business, namely life assurance underwriting, general insurance underwriting, and insurance broking business. The second test is opposite to the first one, i.e. the test of return and risk effects on European insurance holding companies diversification into banking business (Chapter five and six respectively). Based on finance literature, econometric work is employed for these tests. The results of the first test shows that banks significantly increase their risk in underwriting of life as well as underwriting of general insurance business. Expansion in life underwriting significantly increases returns but the effect on return from expanding in general insurance underwriting is not significant. The most profitable expansion is into insurance broking business since our results indicate a significant positive effect on return with no adverse effects on risk. On the other hand, the results of the second test shows that the insurance companies bankruptcy risk although increases, two other risk measurements indicate significant risk reduction, and the return in this case does not have significant effect. This suggests that only the cross-business distribution activities should be permitted and the cross-business underwriting activities should be restricted in order to reduce the probability of bankruptcies

Addressing Gaps in the Dodd-Frank Act: Directors\u27 Risk Management Oversight Obligations

In the years leading to the recent financial crisis, finance theorists introduced innovative methods, including quantitative financial models and derivative instruments, to measure and mitigate risk exposure. During the financial crisis, financial institutions facing insolvency revealed pervasive misunderstandings, misapplications, and mistaken assumptions regarding these complex risk management methods. As losses in financial markets escalated and caused liquidity and solvency crises, commentators sharply criticized directors and executives at large financial institutions for their risk management decisions. By adopting the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress directly and indirectly addresses certain risk management oversight concerns at large, complex financial institutions. To improve risk management oversight at these institutions, Congress imposed several structural reforms altering the composition and obligations of financial institutions\u27 boards of directors. Unfortunately, even after the adoption of the Dodd-Frank Act reforms, financial institutions remain vulnerable to the same critical errors in enterprise risk management oversight that engendered systemic risk concerns during the recent financial crisis. While the Dodd-Frank Act may enhance a board\u27s risk management oversight capabilities, significant concerns persist regarding reliance on board committees. Organizational literature suggests that cognitive biases and structural limitations that influence group decision making will continue to plague boards\u27 efforts to effectively manage risk. This Article argues that better-tailored reforms are necessary to address weaknesses in enterprise risk management regulation and to reduce the threat of systemic risk

Addressing Gaps in the Dodd-Frank Act: Directors\u27 Risk Management Oversight Obligations

In the years leading to the recent financial crisis, finance theorists introduced innovative methods, including quantitative financial models and derivative instruments, to measure and mitigate risk exposure. During the financial crisis, financial institutions facing insolvency revealed pervasive misunderstandings, misapplications, and mistaken assumptions regarding these complex risk management methods. As losses in financial markets escalated and caused liquidity and solvency crises, commentators sharply criticized directors and executives at large financial institutions for their risk management decisions. By adopting the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress directly and indirectly addresses certain risk management oversight concerns at large, complex financial institutions. To improve risk management oversight at these institutions, Congress imposed several structural reforms altering the composition and obligations of financial institutions\u27 boards of directors. Unfortunately, even after the adoption of the Dodd-Frank Act reforms, financial institutions remain vulnerable to the same critical errors in enterprise risk management oversight that engendered systemic risk concerns during the recent financial crisis. While the Dodd-Frank Act may enhance a board\u27s risk management oversight capabilities, significant concerns persist regarding reliance on board committees. Organizational literature suggests that cognitive biases and structural limitations that influence group decision making will continue to plague boards\u27 efforts to effectively manage risk. This Article argues that better-tailored reforms are necessary to address weaknesses in enterprise risk management regulation and to reduce the threat of systemic risk

Abstracts : policy research working paper series - numbers 2300-2362

This paper contains abstracts of Policy Research Working Paper series Numbers 2300-2362.Health Economics&Finance,ICT Policy and Strategies,Environmental Economics&Policies,Health Monitoring&Evaluation,Governance Indicators

Risk Management Tools to Improve the Efficiency of Lending to Retail Segments

This chapter discusses the issue of assessing the quality of risk management for a wide segment of retail lending (from consumer loans to loans for self-employed persons and SMEs). The quality of risk management is assessed using the generally recognized approach of the ROC analysis methodology and assessment of the optimal level of discrimination, taking into account risk-return. The chapter substantiates a marginal formula for assessing the economic benefits of improving the discriminatory power of the scoring models on which risk management is based. Based on the presented approach, it is possible to economically justify the costs of investment resources aimed at improving models and their technical implementation in credit business processes. An assessment of the quality of risk management in the mass lending segment reveals problems in lending strategies caused by the inefficiency of return in relation to risk in individual segments. This provides evidence-based grounds for adjusting strategies. The review of perspective modern directions of development and improvement of scoring models is presented

P.P.R working papers : catalog of numbers 1to 200

This paper contains a numerical listing of working papers produced by the Policy, Planning, and Research Complex. Each citation contains a brief abstract, and the contact point for the paper.Environmental Economics&Policies,Economic Theory&Research,Achieving Shared Growth,Banks&Banking Reform,Poverty Assessment

Decision Support Systems: Issues and Challenges; Proceedings of an International Task Force Meeting, June 23-25, 1980

This book reports on a three-day meeting on Decision Support Systems held at IIASA. IIASA's interest in sponsoring the meeting was spurred by several factors. First, the term DSS clearly is used in a wide range of contexts; we hoped to develop a deeper understanding of the term and the new field to which it refers. Second, we felt that ongoing work in the DSS field would be enhanced by interaction between professionals who had been working on such systems and people from fields that function as "resource disciplines" for DSS. Finally we wished to bring professionals from several nations together, from the east as well as the west, to share experiences and to assess the viability of the DSS concept in different cultures. The broad objectives set for this meeting were realized in a number of ways. Virtually all the participants testified that they had gained a deeper understanding of DSS, the role it can play in asssisting managers in organizations, and the need for further development in key areas