ACADEMIC ARTICLES

Large-scale disasters and the insurance industry
by Walter Krämer and Sebastian Schich                                       

The Effects of Rate Regulation on the Volatility of Auto Insurance Prices – Evidence from Canada
by Darrell Leadbetter, Jane Voll and Erica Wieder                           

PROFESSIONAL ARTICLES

Les titres adossés à des créances hypothécaires : le marché américain et le marché canadien
by Martin Boyer et François Girard                                                 

Drame sur l’Everest le 10 mai 1996 : la rencontre d’un aléa météorologique et d’une vulnérabilité organisationnelle
by Bastien Soulé                                                                         
 

Current Events
under the responsibility of Rémi Moreau

1. Quelques nouvelles dans la réassurance – 2. Les sinistres catastrophiques assurés en 2007 – 3. Quelques résultats des réassureurs américains en 2007 – 4. Les tempêtes hivernales chinoises ont coûté 7,5 milliards de dollars – 5. Emma, une tempête européenne d’environ 2 milliards de dollars – 6. L’affaire Société générale et la question du contrôle interne   7. Perte historique pour l’assureur américain AIG – 8. Le bénéfice net de l’assureur allemand Allianz et de l’assureur français Axa en 2007 – 9. La question des commissions contingentes, décriée aux États-Unis, refait surface en Europe   10. Eliot Spitzer dans la tourmente – 11. L’affaire Cadman ou l’offre d’une assurance vie à une personne à l’article de la mort – 12. Fonds en déshérence pour les victimes de l’holocauste – 13. Bilan routier au Québec en 2007  14. Assurabilité des pertes financières en assurance de dommages – 15. La crise financière américaine atteint la cinquième banque d’affaires américaine – 16. Desjardins, General Insurance

Subjects’ and Authors’ Index – April 2007 to January 2008

The Internet Surfer Page
Lavery, de Billy

Large-scale disasters and the insurance industry
by Walter Krämer and Sebastian Schich

The authors investigated the impact of the 20 largest – in terms of insured losses – man-made or natural disasters on various insurance industry stock indices. They show via an event study that insurance sectors worldwide are quite resilient, in a market–value sense, to unexpected losses to capital. The data provide evidence that equity market investors believe that insurance companies will on average be able to make losses back over the foreseeable future, i.e. that the adverse shocks to equity which have resulted from these catastrophes will be compensated by either an outward shift of the demand curve or by an ability to raise premiums, or both.

Keywords: Disaster, insurance industry, event-study.

The Effects of Rate Regulation on the Volatility of Auto Insurance Prices - Evidence from Canada
by Darrell Leadbetter, Jane Voll and Erica Wieder

Previous studies using U.S. data have found that rate regulation reduces competition, availability of coverage and increases volatility of insurance premiums. This article extends the U.S. literature to the Canadian context to examine whether rate regulation increases premium volatility in the province of Ontario. Based on an empirical analysis using data covering six provinces over the 18–year period from 1984 to 2001 we find that rate regulation is significant in explaining the volatility in average insurance premiums, after accounting for claims related costs. This finding is consistent with results from other jurisdictions.

Keywords: Price regulation, auto insurance, price volatility.

Les titres adossés à des créances hypothécaires :le marché américain et le marché canadien
by Martin Boyer et François Girard

The current article follows the one on the characteristics and the property of the mortgage-backed security market that we published in the previous issue of Insurance and Risk Management. In this sequel article, we compare the U.S. mortgage-backed market with the Canadian market. Understanding how these markets work is essential if one wants to assess the why and the how of the sub-prime crisis that affected the mortgage-backed security market in the latter part of 2007.

Drame sur l’Everest le 10 mai 1996 : la rencontre d’un aléa météorologique et d’une vulnérabilité organisationnelle
by Bastien Soulé

The 10th of May 1996, many expeditions were attempting to summit Mt Everest, while a sudden and violent storm occurred, entailing 12 fatalities among the ascensionists. After having limited the scope to two North-American commercial expeditions, we described the combination of risk factors that increased the organizations’ vulnerability. The meteorological hazard indeed combined with peculiar organizational contexts, composed of decisions which started the accidental sequence, and deteriorated crisis management. It seems quite clear that within expeditions, differing objectives, sometimes inconsistent with safety, were pursued; besides, some rules and understandings were poorly reminded, enforced and abided by; heterogeneity of technical standards and experience is also involved, as well as the trivialization of danger inherent in climbing Mt Everest. Our choice to develop a systemic approach to the tragedy seems relevant: due to interdependency between a priori minor and disconnected micro-events, catastrophe became gradually less and less avoidable.

Keywords: Everest, himalayism, risk, safety, systems theory.

Cinquante ans de «marées noires» : radioscopie des catastrophes liées à la pollution par les hydrocarbures
by Rémi Moreau

The author examines the major recorded oil spills into international and national seas, some of them occurring in Canada, caused by supertankers: the Torrey Canyon, the Arrow, the Amoco Cadiz, the Gino, the Aegean Captain and the Atlantic Express, the Odyssey, the Exxon Valdez, the Braer, the Maersk Navigator, the Erika, the Prestige and the Ixtoc 1 (oil well).

But, there are a lot more accidents, since those black tides began, in 1960. Each year, since the seventies, we could count around half-dozen of such oil spills disasters. Annex A provides a table listing all oil spill accidents from tankers since 1975 involving more than 20 000 tonnes of oil. Annex B provides the chronological list of all accidents since 1960.

Following the recent verdict in the Total SA affair (the Erika charterer), announced by the Paris Criminal Court on January 16, 2008, after several years of trial, the author takes this opportunity of studying oil spill accidents and causes, some research programs, ecological and economical impacts, legal aspects, insurance and indemnification, all in order to learn some lessons from such perils of sea.

Keywords: Petroleum, oil pollution from tankers, marine pollution, IMO, international conventions, FIPOL (compensation funds).