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International audience; Soil available water capacity (SAWC) is becoming a crucial issue for forest management in the context of climate change. However, the SAWC indicator, which was created for agricultural soils, needs specific adaptations when it is estimated for forest soils. This study aims to determine the best way to apply the SAWC indicator with regard to its significance for explaining variation in tree fertility across a given region. An extensive investigation with spatial sampling of 100 Douglas fir stand plots was conducted in the Haut Languedoc Regional Nature Parc (Southern France). It involved stand fertility assessments, morphological observations of deep soil pits including the saprolite, quantitative estimations of coarse fragments, texture and organic matter laboratory analysis and water retention and density measurements on a limited sample of horizons (35). Different approaches were used to compute SAWC from the collected data. These approaches differed in the methods i) for estimating the fine earth water retention - national vs local pedotransfer function -, ii) for incorporating coarse fragments - assumed to contribute or not to the water retention of soils- and iii) for estimating soil volumes - variable thicknesses and considerations of rooting. The results showed that the estimate of SAWC that explained the greatest variation in tree fertility over the study area (23% of the variance) was obtained by estimating fine earth water retention from a local pedotransfer function, by considering the water retention of the coarse fraction and by exploring the thickest soil volumes (thicknesses of 200 cm, 300 cm and equal to the depth to bedrock) without explicit consideration of rooting observations. The ranking of SAWC component impact on SAWC values was i) soil volume, ii) coarse fraction water retention and iii) fine earth retention. These results indicate that improvements in estimating coarse fraction water retention and soil volume and, to a lesser extent, fine-earth water retention estimated by a forestsoil-adapted pedotransfer function would greatly benefit the application of the SAWC indicator to forest soils.

It has been argued that the opaqueness of structured bonds, such as mortgage-backed securities, asset-backed securities and collateral debt obligations, was one of the major causes of the recent financial crisis that started in late 2007. We analyse the evolving nature of information asymmetry inherent in various types of structured bonds by examining the U.S. insurers’ assets. We show that, prior to 2004, structured bonds were not associated with greater information asymmetry; however, holding more multi-class structured bonds, especially privately placed bonds, increased the information asymmetry when evaluating insurers’ assets post-2004. The effect of information asymmetry was more significant with life insurers than with non-life insurers. In addition, by investigating the rating grades of such structured bonds, we find that the market views higher-grade, privately placed, multi-class structured bonds as having the highest information asymmetry among all types of structured bonds post 2004, an effect which is, again, more significant with life insurers. This result shows that structuring complexities and unreliable ratings make structured bonds more opaque than just securitisation itself.

When evaluating tree architecture, condition and vitality, often, the prevalence and morphology of epicormic shoots are ignored or misinterpreted. However, epicormic shoots can play a fundamental role in tree survival and need to be taken into account when they occur. The presence and abundance of three morphologically different types of epicormic shoots can be used to distinguish between trees which are healthy, stressed, resilient (i.e. likely to recover after being stressed), undergoing natural crown retrenchment, or in a state of irreversible decline. Orthotropic and plagiotropic epicormic shoots, which respectively replicate the architecture of young trees and branches, act as the tree's “life insurance” against future catastrophe. On the other hand, ageotropic epicormic shoots, which have the characteristics of old age, indicate irreversible decline. Analysis of annual growth-ring width has shown that the architectural characters assessed for pedunculate oak (Quercus robur L.) are good indicators of...

Obviously, the design of a bonus–malus system has to take into consideration all rating variables used by the auto insurance carrier. For instance, a single male urban driver is likely to be penalized twice, a priori through explicit surcharges linked to his risk class, and a posteriori through premium increases triggered by the transition rules of the bonus–malus system, creating the possibility of excessive premiums through double-counting for the same reason. Taylor (ASTIN Bull 27:319–327, 1997) developed a Bayesian model to evaluate the impact of covariate rating variables on bonus–malus premium levels, but could not access actual data to implement his model. We present the first real-life application of Taylor’s research, by using a unique database originating from Taiwan and the bonus–malus system in force in this island. Our data combines car and insurance information from the leading insurer in the island with annual mileage readings from a network of repair shops operated by the largest car manufacturer—over a quarter million policy-years. Park et al. (The use of annual mileage as a rating variable. Working paper, 2014), using the same data, used negative binomial regression to prove that mileage is by far the best predictor of accidents. The application of Taylor’s model concludes that the impact of mileage on bonus–malus premium levels is small. Therefore, double-counting should not be considered as a major concern in practice.

Most Asian countries have adopted bonus-malus systems (BMS) in automobile insurance. We evaluate the toughness towards consumers of 16 Asian BMS and its correlation with cultural and economic variables. We use principal components analysis to define a Maturity Index of insurance markets and find supporting evidence for a conjecture that, as markets become more mature and policy-holders more sophisticated, countries adopt tougher BMS. In addition, we find, using regression analysis, that using a Common Law legal system is a crucial factor in BMS design. Cultural variables, such as uncertainty avoidance, also influence BMS.

In the United States, firearms are involved in tens of thousands of deaths and injuries each year. The magnitude of this problem prompted the National Academy of Sciences (NAS) to issue a report in 2004 detailing the strengths and limitations of existing research on the relationship between firearms and violence. In response, a multidisciplinary group of experts in the field of firearms and violence formed the National Research Collaborative on Firearm Violence. The Collaborative met for 2 days in June 2005 to (1) critically review the main findings of the NAS report and (2) define a research agenda that could fill research and data gaps and inform policy that reduces gun-related crime, deaths and injuries. This article summarizes the Collaborative's conclusions and identifies priorities for research and funding.

Consumer groups fear that the use of genetic testing information in insurance underwriting might lead to the creation of an underclass of individuals who cannot obtain insurance; thus, these groups want to ban insurance companies from accessing genetic test results. Insurers contend that such a ban might lead to adverse selection that could threaten their financial solvency. To investigate the potential effect of adverse selection in a term life insurance market, a discrete-time, discrete-state, Markov chain is used to track the evolution of twelve closed cohorts of women, differentiated by family history of breast and ovarian cancer and age at issue of a 20-year annually renewable term life insurance policy. The insurance demand behavior of these women is tracked, incorporating elastic demand for insurance. During the 20-year period, women may get tested for BRCA1/2 mutations. Each

The United States remains far behind most other affluent countries in terms of life expectancy. One of the possible causes of this life expectancy gap is the widespread availability of firearms and the resulting high number of U.S. firearm fatalities: 10,801 homicides in 2000. The European Union experienced 1,260 homicides, Japan only 22. Using multiple decrement techniques, I show that firearm violence shortens the life of an average American by 104 days (151 days for white males, 362 days for black males). Among all fatal injuries, only motor vehicle accidents have a stronger effect. I estimate that the elimination of all firearm deaths in the United States would increase the male life expectancy more than the total eradication of all colon and prostate cancers. My results suggest that the insurance premium increases paid by Americans as a result of firearm violence are probably of the same order of magnitude as the total medical costs due to gunshots or the increased cost of administering the criminal justice system due to gun crime.

The mean age at marriage is increasing in nearly all regions of the world, with the gender age difference at marriage tending to decrease. Five hypotheses for these trends (economic modernization, supply and demand, social/cultural/religious influences, healthcare quality, and longevity risk sharing) are tested through cross-country regression analyses of the timing and prevalence of marriage, using 40 explanatory variables from 156 countries. The dependent variables are female mean age at marriage, gender age difference, and proportion of females married by age 20-24. Ample evidence of the impact of economic modernization and education is found. The influence of cultural beliefs is evidenced by the presence of religious variables in several selected regression equations.

In a deregulated insurance market, insurance carriers have an incentive to be innovative in their pricing decisions by segmenting their portfolios and designing new bonus-malus systems (BMS). This paper examines the evolution of market shares and claim frequencies in a two-company market, when one insurer breaks off the existing stability by introducing a super-discount class in its BMS. Several assumptions concerning policyholders and insurers behavior are tested. Diffusion theory is used to model the spread of the information concerning the new BMS among prospective customers. A wide variety of market outcomes results: one company may take over the market or the two may survive with equal or unequal market shares, each specializing in a specific niche of the market. Before engaging in an aggressive competitive behavior, insurers should consequently be reasonably confident in their assumptions concerning the reactions of their policyholders to the new BMS.

Life insurance industry access to genetic information is controversial. Consumer groups argue that access will increase discrimination in life insurance premiums and discourage individuals from undergoing genetic testing that may provide health benefits. Conversely, life insurers argue that without access to risk information available to individuals, they face substantial financial risk from adverse selection. Given this controversy, we conducted a retrospective cohort study to evaluate the impact of breast cancer risk information on life insurance purchasing, the impact of concerns about life insurance discrimination on use of BRCA1/2 testing, and the incidence of life insurance discrimination following participation in breast cancer risk assessment and BRCA1/2 testing. Study participants were 636 women who participated in genetic counseling and/or genetic testing at a University based clinic offering breast cancer risk assessment, genetic counseling, and BRCA1/2 testing between January 1995 and May 2000. Twenty-seven women (4%) had increased and six (1%) had decreased their life insurance since participation in breast cancer risk assessment. The decision to increase life insurance coverage was associated with predicted breast cancer risk (adjusted OR 1.03 for each 1% absolute increase in risk, 95% CI 1.01-1.10) and being found to carry a mutation in BRCA1/2 (OR 5.10, 95% CI 1.90-13.66). Concern about life insurance discrimination was inversely associated with the decision to undergo BRCA1/2 testing (RR 0.67, 95% CI 0.52-0.85). No respondent reported having life insurance denied or canceled. In this cohort of women, these results indicate that information about increased breast cancer risk is associated with increase in life insurance purchasing, raising the possibility of adverse selection. Although fear of insurance discrimination is associated with the decision not to undergo BRCA1/2 testing, there was no evidence of actual insurance discrimination from BRCA1/2 testing.

In most countries, females live several years longer than males. Many biological and behavioral reasons have been presented in the scientific literature to explain this “female advantage.” A cross-sectional regression study, using 45 explanatory variables and data collected from 169 countries, provides support to the behavioral hypothesis. Four variables, unrelated to biological sex differences, explain over 61% of the variability of the life expectancy differential. One variable (the number of persons per physician) summarizes the degree of economic development of a country. The three other selected variables (the fertility rate, the percentage of Hindus and Buddhists, and Europeans countries of the former Soviet Union) are social/cultural/religious variables. This conclusion is slightly weakened when the presence of spatial autocorrelation in the data is specifically acknowledged.

We estimate the increased mortality and term life insurance costs for women who have a family history of breast or ovarian cancer. Using data from the medical literature on age-specific and family history-specific incidence rates, we develop double-decrement models to evaluate the actuarial impact of breast cancer and ovarian cancer in the family. We also calculate the increased mortality and term insurance costs for women who test positive for the BRCA1 or BRCA2 gene mutation. We find that the type of affected relative and her age at onset of the disease are key underwriting factors. We find substantial mortality increases (up to 100%) for women with two relatives with cancer and women with a first-degree relative who developed cancer at an early age. Mortality increases for women with the BRCA gene mutation reach 150%. While some females with a family history of cancer can be accepted at standard rates, others may need to be quoted substandard rates, depending on the underwriting policy of the ...

Bonus-malus is a merit-rating technique used in most of Europe and Asia, and some Latin American and African countries. Policyholders from a given risk cell are subdivided into bonus-malus classes. Their claims histories then modify the class upon each renewal. Markov chain theory provides the tools for the design, evaluation, and comparison of these systems. In this article, definitions and examples of bonus-malus systems are provided (Section 2). The main actuarial tools for the study and design of bonus-malus systems are reviewed (Section 3). In the discussions that follow, Krupa Subramanian outlines a model for analyzing market shares in a competitive environment, a crucial research topic given current deregulation trends, and Pierre Lemaire compares actuarial with regulatory approaches to bonus-malus.

This paper explores the growth/climate relationships in earlywood, latewood and total ring-width chronologies of Chestnut (Castanea sativa Mill.) in three areas with different climatic conditions (humid, mesic and dry climate) in the Limousin region (36 stands, 146 sampled trees in high forests). Earlywood growth mainly depends on the previous autumn’s conditions (November) and late winter temperatures (February and March, negative effects of high temperatures). Subsequent spring precipitation (May-June) plays a major role for the production of earlywood; the effect of spring rainfall being greater under the driest climate. Temporal analyses revealed unstable sensitivity to spring conditions, which raises questions about the future of this species in the area of investigation.

The automobile third party insurance merit-rating systems of 22 countries are simulated and compared, using as main tools the stationary average premium level, the variability of the policyholders' payments, their elasticity with respect to the claim frequency, and the magnitude of the hunger for bonus. Principal components analysis is used to define an “Index of Toughness” for all systems.

Holtan (1994) suggests to replace traditional bonus-malus systems by a high deductible financed by a short-term loan. Practical consequences of this proposal are investigated here. Simulation is used to evaluate the efficiency of the Taiwanese Bonus-malus system and the variability of premiums of an average policyholder. Holtan's high deductible system is analysed under a compound Poisson assumption, with truncated exponential claims. It is shown that the introduction of a high deductible would increase the variability of payments and the efficiency of the rating system for most policyholders.

A large body of literature addresses the determination of the economic, financial and institutional factors that significantly influence variations of life insurance demand across countries. Chui and Kwok (2008) included four cultural variables developed by IBM psychologist Hofstede and demonstrated that culture has a profound impact on life insurance consumption. We extend Chui and Kwok's work by analyzing the fifth Hofstede cultural dimension: Long-Term Orientation, a variable that scores countries based on adherence to Confucian principles such as perseverance and thrift, respect of tradition and family values, and honoring of parents and ancestors. After building a database that includes values of 17 variables for 27 countries over a period of 9 years, we apply an unbalanced panel GLS regression model to prove that Long-Term Orientation has a strong positive influence on life insurance demand. Additionally, two new variables, not used in previous life insurance literature, are also found to impact life insurance demand: a modified Herfindahl index and the use of a Common Law legal system. Several robustness tests confirm the importance of Long-Term Orientation, leading to the conclusion that life insurance consumption is bound to increase rapidly in Asia, as its GDP per capita increases.

This paper contributes to a better understanding of the risks involved in a life annuity investment. We study the full distribution of weighted annuity benefits and quantify risk measures such as dispersion and skewness, thereby extending the usefulness of the popular money’s worth valuation framework for life annuities. Using data from pension annuities in Singapore, we also introduce several risk measures that might appeal to less financially sophisticated retirees. A more detailed and accurate picture of the risk of investing in life annuities emerges, enabling prospective annuitants to differentiate among products that may appear seemingly uniform in terms of money’s worth, but vary widely in terms of their risk attributes.

This survey paper presents the basic concepts of cooperative game theory, at an elementary level. Five examples, including three insurance applications, are progressively developed throughout the paper. The characteristic function, the core, the stable sets, the Shapley value, the Nash and Kalai-Smorodinsky solutions are defined and computed for the different examples.

Bonus-malus is the most common form of a posteriori rating in automobile third-party liability insurance. The policyholder moves around the classes of a Markov chain according to his annual number of claims. Claim-free years are rewarded by premium discounts or bonuses; at-fault accidents are penalized by surcharges called maluses. The different principles underlying the design and evaluation of bonus-malus systems are reviewed. Keywords: automobile insurance; third-party liability; Markov chains; no-claim discount; a posteriori rating

OBJECTIVE: A recent study (Lemaire) estimated the life expectancy loss attributable to gun deaths at 103.6 days for the overall U.S. population: 150.7 days for white males and 361.5 days for black males. This study estimates the life expectancy loss attributable to the premature death of individuals who initially survived gun-related traumatic brain injury (TBI) and spinal cord injury (SCI) in the United States. DESIGN: Interpersonal TBI data were drawn from a surveillance system, and self-inflicted TBI data were obtained from the Web-based Injury Statistics and Reporting System. SCI data were obtained from a national database. Multiple decrement analysis was used to calculate the days of life lost to gunshot wounds to the brain and spinal cord, by race and gender, in the United States. RESULTS: On average, across age, gender, and race, life expectancy in the United States is reduced by 3.1 days because of the shorter lifespan for individuals who survive an initial gunshot wound to the brain or spinal cord. Black males bear a disproportionate burden, losing 9.5 days, whereas white males lose 4.6 days. Black and white females lose 1.5 and 1.0 days, respectively. CONCLUSIONS: We add these findings to the Lemaire study, resulting in a total of 106.7 days of life expectancy loss from gunshot wounds for the U.S. population, with 371.0 days of life lost for black males. Language: en

Fuzzy set theory is a recently developed field of mathematics, that introduces sets of objects whose boundaries are not sharply defined. Whereas in ordinary Boolean algebra an element is either contained or not contained in a given set, in fuzzy set theory the transition between membership and non-membership is gradual. The theory aims at modelizing situations described in vague or imprecise terms, or situations that are too complex or ill-defined to be analysed by conventional methods. This paper aims at presenting the basic concepts of the theory in an insurance framework. First the basic definitions of fuzzy logic are presented, and applied to provide a flexible definition of a “preferred policyholder” in life insurance. Next, fuzzy decision-making procedures are illustrated by a reinsurance application, and the theory of fuzzy numbers is extended to define fuzzy insurance premiums.

Game theory models situations of conflict and/or cooperation between economic agents. Cooperative games with transferable utilities and two-person bargaining games, the two most important contributions of cooperative game theory to economic analysis, are reviewed and illustrated with examples. Keywords: cooperation between economic agents; risk exchange; allocation of profit; measurement of voting power; bargaining and negotiation

Borch's theorem, the most important application of utility theory and game theory in insurance, characterizes the set of Pareto optimal treaties in an exchange of risk among policyholders, insurers, or reinsurers. Concepts from game theory, such as the core or a value for bargaining games, narrow down the set of acceptable treaties. Keywords: risk exchange; Pareto optimality; quota-share; utility theory; game theory

This paper provides an empirical estimate of price' and risk' elasticities of demand for term life insurance for those who purchase some insurance. It finds that the elasticity with respect to changes in premiums is generally higher than the elasticity with respect to changes in risk. It also finds that the elasticity, in the range of -0.3 to -0.5, is sufficiently low that adverse selection in term life insurance is unlikely to lead to a death spiral and may not even lead to measured effects of adverse selection on total purchases.

This paper provides an empirical estimate of price' and risk' elasticities of demand for term life insurance for those who purchase some insurance. It finds that the elasticity with respect to changes in premiums is generally higher than the elasticity with respect to changes in risk. It also finds that the elasticity, in the range of -0.3 to -0.5, is sufficiently low that adverse selection in term life insurance is unlikely to lead to a death spiral and may not even lead to measured effects of adverse selection on total purchases.

Belgium is a heavily regulated country, where third-party automobile insurance was made compulsory in 1956. Traditionally, insurers have used very few classification variables in the rating of automobile third-party liability policies. Only some characteristics of the car model (engine displacement or power, sporting nature) were used to differentiate premiums, along with a very moderate deductible for young drivers. Territory was used by only a few companies, for selected remote areas of the country.

The preceding chapter recommends the use of a very high deductible as an alternative to BMS. The suggested deductible is much higher than values commonly used in automobile insurance. In this chapter, we use utility theory to determine the optimal value of a deductible. As deductibles are not commonly offered in third-party liability, the model uses automobile collision insurance data and terminology.

In this chapter four different probability models are developed to represent the distribution of the number of claims in an insurance portfolio. The Poisson distribution is shown to provide a good description of the behavior of individual policyholders. It will be used in chapters 4 to 9 to compare the different BMS from a policyholder’s perspective. The Poisson is, however, inadequate to describe the number of losses in an insurance portfolio. The negative binomial distribution provides much better fits and will be used in chapters 10 to 14 to build optimal BMS. Two other distributions that belong to the class of mixed Poisson processes are also introduced.

All four measures defined in chapters 4 to 7 can be used to evaluate the “mildness” or “toughness” of a bonus-malus system. A system that penalizes claims heavily will exhibit high RSAL, high premium variability, high elasticity, and high average optimal retentions. These four measures, presented in tables 4–1, 5–1, 6–1, and 7–1 for a policyholder with claim frequency 0.10, are, however, highly positively correlated, as shown in table 8–1.

The two main reasons for the introduction of a bonus-maius system are (1) to reward the accident-free drivers with bonuses, while penalizing bad drivers with maluses and (2) to induce policyholders to drive more carefully. Other policy incentives have been suggested to achieve the same goals. In this part, we will investigate the effect of the introduction of a deductible. With a deductible, policyholders participate in the financial consequences of an accident. They are thus encouraged to drive carefully. Moreover, bad drivers are penalized, since over a lifetime they are expected to pay more deductibles than good drivers. So it may be argued that a deductible achieves the same goals as a BMS. Vandebroek (1993), using a dynamic programming model, even argues that partial coverage is superior to BMS in inducing a proper level of care by policyholders.

With the exception of Korea, all bonus-malus systems in force throughout the world penalize the number of reported claims, without taking the costs of such claims into account. A mere scratch causes the same premium increase as a serious bodily injury accident. This procedure is unfair to town dwellers, among others, since traffic density creates more, but less severe, accidents. The negative binomial model has been generalized by Picard (1976) to take into account the subdivision of claims into two categories, small and large losses. Picard’s model is applied here to the Belgian data used throughout part 3. Two options have been considered to separate large and small claims: 1. Determine a limiting amount, for instance 50,000 Belgian francs. Claims for less than this limit are regarded as small, and the remainder as large. Using this criterion would lead to substantial practical problems, due to the time required to make a first (often unreliable) assessment of the losses, as well as endless arguments with policyholders who caused a claim slightly above the limit. Moreover, the model did not provide satisfactory results, as the fit was poor. 2. Distinguish the accidents that caused property damage (PD) only from these that caused bodily injury (BI). Since the latter cost much more on average, penalizing more severely the policyholders who cause bodily injury seems fair. Introducing this criterion in a BMS would not lead to many practical problems. BI claims are reported early to the company, as the police have to be called. The distinction between PD and BI is clear-cut in most cases. Possibly the definition of a BI claim could exclude single routine medical office visits and check-up X-rays after the accident.

As detailed in chapter 2, the old Belgian system, in force since 1971, exemplified the major problem faced by insurers using a mild bonus-malus system: a strong clustering of policies in the high-discount classes. With only a two-class penalty for the first claim, the system was designed for an average claim frequency close to 1/3. The much lower claim frequencies observed since the 1974 oil shock created an increasing lack of financial balance, with over 80 percent of the policyholders in one of the three lowest classes in 1992, and less than 0.5 percent of insureds in the malus zone. This led the Professional Union of Insurance Companies to set up a study group and suggest a new system to the regulatory authorities (see Lemaire, 1988a). The new system was implemented late in 1992. It penalizes the first claim by four classes.

Most developed countries use several classification variables to differentiate premiums among automobile third-party liability policyholders. Typical variables include age, sex, and occupation of the main driver, the town where he resides, and the type and use of his car. More exotic variables, such as the driver’s marital status and smoking behavior, or even the color of his car, have been introduced in some countries. Such variables are often called a priori rating variables, as their values can be determined before the policyholder starts to drive. The main purpose for their use is to subdivide policyholders into homogeneous classes. If, for instance, females are proved to cause significantly fewer accidents than males, equity arguments suggest that they should be charged a lower premium. Moreover, if a company was to disregard this variable and charge an average premium to everyone, regardless of gender, most of its female policyholders would switch to another carrier, leaving the company with a disproportionate population of males and insufficient premium income to pay for claims.

Part 2 develops tools for analyzing bonus-malus systems. Extensive simulations are used to compare and rank thirty different systems, from twenty-two countries: six countries from East Asia (Hong Kong, Japan, South Korea, Malaysia-Singapore, Taiwan, Thailand), fourteen European countries (Belgium, Denmark, Finland, France, Germany, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom), as well as Kenya and Brazil. Several of these countries have recently modified their system. In these cases both the old and the new BMS are studied in order to investigate the impact of the recent modifications. In some countries many different BMS coexist; only one or two typical systems are then analyzed. All BMS are described in appendix B.