nsolvency Experience, Risk-Based Capital, and Prompt Corrective Action in Property-Liability Insurance

In December 1992, the National Association of Insurance Commissioners (NAIC) adopted a life-health insurer risk-based capital (RBC) formula and model law that became effective with the 1993 annual statement filed in March 1994. In principle, well-designed RBC requirements can help achieve an efficient reduction in the expected costs of insolvencies. They can provide incentives for insurers to operate safely in cases where market incentives are weak due to government mandated guarantees of insurer obligations or asymmetries regarding solvency between insurers and buyers. RBC requirements also may facilitate or encourage prompt corrective action by solvency regulators by helping regulators to identify weak insurers and giving regulators legal authority to intervene when capital falls below specified levels. RBC requirements may force regulators to act in amore timely manner when confronted with external pressure to delay action. However, RBC capital requirements have a number ofpotential limitations. Unavoidable imperfections in any meaningful RBC system will likely distort some insurer decisions in undesirable and unintended ways. RBC requirements by themselves will do little or nothing to help regulators determine when an insurer s reported capital (surplus) is overstated due to understatement of liabilities or overstatement of assets. A well-designed RBC system should minimize costs associated with misclassification of insurers. The system should be able to identify a high proportion of troubled companies early enough to permit regulators to take prompt corrective action and should identify as troubled only a minimal proportion of financially sound insurers. This study analyzes data on solvent and insolvent property-liability insurers to determine whether modifications in the NAIC s RBC formula can improve its ability to predict firms that subsequently fail without substantially increasing the proportion of surviving insurers that are incorrectly predicted to fail. It uses logistic regression models to investigate whether changes in the weight for the major components in the RBC formula and incorporation of information on company size and organizational form improve the tradeoff between Type I error rates (the percentage of insurers that later failed that are incorrectly predicted not to fail) and the Type II error rates (the percentage of surviving insurers that are incorrectly predicted to fail). The data analyzed were for 1989-91 for firms that subsequently failed and for firms that survived through the first nine months of 1993. The authors make four main conclusions. First, less than half of the companies that later failed had RBC ratios within the proposed ranges for regulatory and company action. Second, total and component RBC ratios generally are significantly different for failed and surviving firms based on univariate tests. Third, estimation of multiple logistic regression models of insolvency risk indicated that allowing the weights of the RBC component to vary and including firm size and organizational form variables generally produce a material improvement in the tradeoff between sample Type I and Type II error rates. And, fourth,the RBC models are noticeably less successful in predicting large firm insolvencies than in predicting smaller insolvencies. Regarding the estimated weights in the logistic regression models, a major conclusion is the reserve component of the NAIC risk-based capital formula, which accounts for half of industry risk-based capital, has virtually no predictive power in any of the tests conducted. Given the high costs associated with large failures and the inferior performance of the models in predicting large insolvencies, a higher payoff in terms of reduced insolvency costs is likely to be achieved by developing models that perform better for large firms.

Long-range quantum entanglement in noisy cluster states

We describe a phase transition for long-range entanglement in a three-dimensional cluster state affected by noise. The partially decohered state is modeled by the thermal state of a suitable Hamiltonian. We find that the temperature at which the entanglement length changes from infinite to finite is nonzero. We give an upper and lower bound to this transition temperature.Comment: 7 page

Analysis of Various Energy Storage Systems for Variable Speed Wind Turbines

During the high penetration of wind power, wind turbines can affect power quality directly due to an unstable and intermittency source. Voltage fluctuations, harmonics, and voltage drops might be factors in this environment. Energy storage systems (ESSs) with variable speed wind turbines (VSWTs) as a permanent magnetic synchronous generator (PMSG) and a doubly fed induction generator (DFIG) could be a solution to improve the power quality from the “variability” of wind power. This chapter investigates the proposed system, which comprises a hybrid ESS for the VSWT. It analyzes the ability of various ESSs (B, SC, and EDLC) based on VSWTs with various ESSs for power quality in terms of average THD (%) specified in reference to IEEE std-519-1992 and IEC 61400-21-Ed.2.0. In addition, this chapter investigates the DFIG with hybrid energy storage systems (Li ion battery and super capacitor ESS) for the economic evaluation in terms of payback time. The simulation results have been verified by a power system computer-aided design/electromagnetic transients direct current (PSCAD/EMTDC) to demonstrate the system performance under different scenarios

The Relationship among Participative Management Style, Strategy Implementation Success, and Financial Performance in the Foodservice Industry

This study looked at the degree of participative management used by firms in the restaurant industry. Findings indicated higher levels of action plan implementation success and financial success for restaurant firms using a higher level of participation in decision-making and plan execution. Smaller firms (single unit) were more likely to use an approach with greater participation by middle-level managers and lower-level managers than larger firms (multi-unit). While larger firms had higher financial performance in general, implications include the value of higher participatory approaches by managers to enhance financial and implementation execution, particularly, for smaller restaurant firms

The synergistic effects of elevated temperature and CO2 - induced ocean acidification reduce cardiac performance and increase disease susceptibility in subadult, female American lobsters Homarus americanus H. Milne Edwards, 1837 (Decapoda: Astacidea: Nephropidae) from the Gulf of Maine

Increased greenhouse gas emissions have caused rapid ocean warming (OW) and reduced ocean pH via acidification (OA). Both OW and OA will likely impact marine crustaceans, but they are often examined in isolation. We conducted an environmental-stressor experiment to understand how exposure to current summer conditions (16 °C, pH 8.0), OW only (20 °C, pH 8.0), OA only (16 °C, pH 7.6), or both acidification and warming, OAW (20 °C, pH 7.6), differentially influence thermal physiology and immune response of female subadults of the American lobster, Homarus americanus H. Milne Edwards, 1837. Following a 42 d exposure, cardiac performance was assessed during an acute thermal stress, and lobsters were subjected to a subsequent 21 d pathogen challenge with the bacterium Aerococcus viridans var. homari, the causative agent of gaffkemia. Lobsters under OAW had significantly lower (P ≤ 0.02) Arrhenius break temperatures (ABT), an indicator of thermal limits of capacity, compared to lobsters exposed to all other treatments, suggesting these stressors act synergistically to reduce physiological performance. Individuals from the OW and OAW treatments also had significantly lower (P ≤ 0.035) total hemocyte counts (THCs), an indicator of immune response, and showed a reduced median time to death (by up to 5 d sooner) post A. viridans injection compared to lobsters exposed to current summer conditions. Moreover, nearly twice as many lobsters exposed to OAW lost at least one claw during the pathogen challenge compared to all other treatment groups, potentially increasing the risk of mortality due to secondary infection. Together, these results suggest that OAW will impact the physiology and immune response of subadult H. americanus, potentially influencing successful recruitment to the fishery

Gas transport properties through intact and fractured Callovo-Oxfordian mudstones

A series of controlled water and gas experiments was undertaken on samples of Callovo-Oxfordian (COx) mudstone using a synthetic fluid and helium gas. Data from this study demonstrate that the advective movement of gas through COx is accompanied by dilation of the original fabric (i.e. the formation of pressure-induced microfissures) at gas pressures significantly below that of the minimum principal stress. Flow occurs through a local network of unstable pathways, the properties of which vary temporally and spatially within the mudstone. The coupling of variables results in the development of significant time-dependent effects affecting many aspects of COx behaviour, from the gas breakthrough time to the control of deformation processes. Variations in gas entry, breakthrough and steady-state pressures may result from the arbitrary nature of the flow pathways and/or microstructural heterogeneity. Under these conditions, the data suggest that gas flow is along pressure-induced preferential pathways, where permeability is a dependent variable related to the number, width and aperture distributions of these features. This has important implications for modelling gas migration through low permeability, clay-rich materials

Fault-tolerant quantum computation with high threshold in two dimensions

We present a scheme of fault-tolerant quantum computation for a local architecture in two spatial dimensions. The error threshold is 0.75% for each source in an error model with preparation, gate, storage and measurement errors.Comment: 4 pages, 4 figures; v2: A single 2D layer of qubits (simple square lattice) with nearest-neighbor translation-invariant Ising interaction suffices. Slightly improved threshol

Gas network development in a precompacted bentonite experiment: evidence of generation and evolution

In a deep geological disposal facility for radioactive waste, precompacted bentonite is proposed as a sealing material for the isolation of boreholes, disposal galleries and deposition holes. The advective movement of repository gas in bentonite has been linked to the development of new porosity and propagation of dilatant pathways. For the first time we present a detailed analysis of stress field data during the generation and evolution of a gas network. A new experimental dataset, from a highly instrumented test, clearly shows the strong coupling between stress, gas pressure and flow in bentonite. Multiple discrete propagation events are observed, demonstrating spatial variability and time-dependency as permeability within the clay develops. Analysis of the stress data before, during and after gas entry indicates a heterogeneous stress field initially develops, resulting from the development of these pathways. The flow network is dynamic and continues to spatially evolve after gas entry, such that permeability under these conditions must be time-dependent in nature. Perturbation of the stress field is significant before all major gas outflow events, presumably resulting from the requirement to propagate an effective gas network before outflow is possible. In contrast, no major flow perturbations are detected which did not correlate with fluctuations in the stress field. The controls on the distribution and geometry of the resulting flow network are unclear, as well as its long-term evolution and stability. These will be beneficial in the assessment of gas pressure evolution as part of safety case development

An experimental study of the flow of gas along synthetic faults of varying orientation to the stress field: implications for performance assessment of radioactive waste disposal

Critical stress theory states that fault transmissivity is strongly dependent upon orientation with respect to the stress tensor. This paper describes an experimental study aimed at verifying critical stress theory using a bespoke angled shear rig designed to examine the relationship between gas flows along a kaolinite-filled synthetic fault as a function of fault dip. A total of 22 gas injection experiments were conducted on faults oriented 0°, 15°, 30°, and 45° to horizontal; both with and without active shear. Gas flow was seen to be complex; repeat gas injection testing showed a consistent gas entry pressure but considerably different, nonrepeatable, gas peak or breakthrough pressure. Gas flow occurred along discrete, dilatant pathways. The physics governing the pressure at which these features formed was repeatable; however, permeability was dependent on the number, distribution, and geometry of the resultant pathways. The nonrepeatable gas response suggests that the number of pathways was dependent on very subtle variations in gouge properties. No fault orientations were seen to exhibit nonflow characteristics, although critical stress theory predicted that two of the investigated fault angles should be effective seals. However, a small variation in gas entry pressure was seen with fault angle as a result of varying normal and shear stress acting on the gouge material. Shear was seen to enhance gas movement by reducing gas entry pressure and increased permeability once gas became mobile. Therefore, in kaolinite gouge-filled faults, shear is not an effective self-sealing mechanism to gas flow