ACADEMIC ARTICLES

 

Cross Hedging with Single Stock Futures
by Chris Brooks, Ryan J. Davies and Sang Soo Kim  

Choix de contrat et sinistralité chez les jeunes conducteurs
by Michel Grun-Réhomme et Noureddine Benlagha  

PROFESSIONAL ARTICLES

Provisions techniques et capital de solvabilité d’une compagnie d’assurance : méthodologie d’utilisation de Value-at-Risk
by Frédéric Planchet et Pierre-E. Thérond                   

Prévention des risques en présence d’asymétries d’information : quelques résultats théoriques
by Bidénam Kambia-Chopin          

Le sinistre/occurrence en assurance de responsabilité civile
by Alain Letourneau                          

Deux études en avantages sociaux : la budgétisation des risques en gestion d’actif des caisses de retraite; la prolongation de la protection contre l’invalidité à la cessation d’emploi
by Groupe-conseil Aon      

Current Events
under the responsibility of Rémi Moreau

1.Risques climatiques : des experts estiment une facture de 1 000 milliards de dollars par an d’ici trente ans – 2. Nouveaux modèles de tarification en réassurance : une vision plus fine des risques et des expositions – 3. Berkshire Hataway acquiert le fonds Équitas-Lloyds – 4. Suite des élections législatives américaines : trois priorités d’assurance de la Chambre des représentants –
5. World Trade Center : la qualification de l’événement finalement tranchée par la justice américaine – 6. Les marchés à terme de Chicago fusionnent – 7. Scor a obtenu une licence d’opération en Chine en assurance de dommages – 8. Les cigarettes légères : les compagnie de tabac vont en appel – 9. Le scandale des stock options aux États-Unis – 10. Élargissement des responsabilités liées à l’environnement en Ontario

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Cross Hedging with Single Stock Futures
by Chris Brooks, Ryan J. Davies and Sang Soo Kim

This study evaluates the efficiency of cross hedging with single stock futures (SSF) contracts. We propose a new technique for hedging exposure to an individual stock that does not have options or exchange-traded SSF contracts written on it. Our method selects as a hedging instrument a portfolio of SSF contracts which are selected based on how closely matched their underlying firm characteristics are with the characteristics of the individual stock we are attempting to hedge. We investigate whether using cross-sectional characteristics to construct our hedge can provide hedging efficiency gains over that of constructing the hedge based on return correlations alone. Overall, we find that the best hedging performance is achieved through a portfolio that is hedged with market index futures and a SSF matched by both historical return correlation and cross-sectional matching characteristics. We also find it preferable to retain the chosen SSF contracts for the whole out-of-sample period while re-estimating the optimal hedge ratio at each rolling window.

Keywords: Single stock futures, hedging, Universal Stock Futures, OneChicago.

Choix de contrat et sinistralité chez les jeunes conducteurs
by Michel Grun-Réhomme et Noureddine Benlagha

In this relationship between the insurer and the policy-holder, between a contract of guarantees and a remuneration (premium or contribution), the insurance company faces up to a risk that is straight connects the information asymmetry which exists between it and the policy-holder.

In a recent paper, A. Cohen (2005) shows that adverse selection is present with young drivers because they have a lack of experience, results which agree with the findings of Chiappori and Salanié (2000).

The study presented in this paper comes within the framework of this last work. There is the equally question on the pertinence of the links existing between the accidents and the choice of contract of the young drivers. Our study is new on two points:

–  It concerns 4 types of guarantees (but no two), that is nearer to the reality in comparison to using a bivariate model.

–  These data are recent. They concern the year 2004, after the implementation of new security measures at the circulation: automatic radars, more strict control of blood alcohol content and more severe punishment for infractions. In addition, this new environment has brought about a decline in mortality from car accidents.

In this modelling, the characteristics that explain the accidents and the choice of guarantee are correlated. In this case, the autonomous estimation of the equation of accidents can include an endogenous bias. The individual characteristics of the young drivers that explain the guarantee choice, explain also positively the probability of accidents. The hypothesis of adverse selection is verified among the young drivers who choose a contract “all risks” with a variable deductible.

Keywords: Automobile insurance, adverse selection, choices of guarantee, accident, damage, bivariate models.

Provisions techniques et capital de solvabilité d’une compagnie d’assurance : méthodologie d’utilisation de Value-at-Risk
by Frédéric Planchet et Pierre-E. Thérond

The advent of the future European prudential framework (Solvency II) and, to a lesser extent, of the phase II of the IFRS dedicated to the insurance contracts, will systematize the use of the Value-at-Risk (VaR) risk measure in insurance. Especially used for financial purposes, the measure of an insurance risk by a VaR technique requires a specific adaptation. Schematically we may distinguish two different contexts, which impose distinct approaches:

–  the measurement of the risk related to the sinistrality by the use of a VaR in the heart of the probability distribution: the technical provision will have to be enough to pay the claims with a 75% probability;

–  the measurement of risk related to the ruin of the company by the mean of a very high order VaR: the solvency capital must to be calibrated to control the ruin if the insurer with a probability higher than 99.5%.

In the first situation, the two standard approaches (historical VaR or modelling the sinistrality) can be based on a statistical material of relative but sufficient size to estimate a VaR in the heart of the probability distribution. In the second case, we are confronted to the absence of observations. Also we have to model the basic variables which influence the solvency of the company in order to be able to simulate the ruin of the company and finally to estimate the high order VaR. This last stage will require the use of Extreme Value Theory.

In this paper, we present the contexts of VaR computation in insurance, the related probabilistic results and the limits of these kinds of criterion for insurance purposes.

Keywords: Solvency, extremes, Value-at-Risk.

Prévention des risques en présence d’asymétries d’information : quelques résultats théoriques
by Bidénam Kambia-Chopin

Prevention is an essential aspect of risk management. Insurance makes it possible to cover risks, but does not always allow implementing the optimal level of prevention because of asymmetric information between insurers and policyholders. Prevention of liability risks is also affected by asymmetric information but a key point when considering this kind of risk is the potential insolvency of the injurer party. A particular attention may be devoted to the financial ability of injurers and financial guarantees that can be offered to those who can be bankrupted by their liability.

Keywords: Insurance, moral hazard, adverse selection, alternative risk transfer, liability, environmental risks, financial guarantee.

Le sinistre / occurence en assurance de responsabilité civile
by Alain Letourneau

In this article, the author analyses the abstruse general liability insurance language surrounding the notions of « accident » and « loss / occurrence », ambiguously interpretated by some cases. As an example, the courts can find difficult to understand the true meaning of “occurrence” when it refers to the time the loss or damage occurs. Since that type of policy is triggered to respond to the claim only when there is an occurrence resulting in property damage suffered during the policy period, no matter the timing of the initial precipitating cause of event, it is obvious that the trial judges get mixed up the time of loss is occurring and the cause of loss (occurrence / cause). Whether this confusion comes from the court interpretation or from the insurance contract, the author suggests some interesting solutions related to occurrence cause or loss.