ACADEMIC ARTICLES

Réplication d’obligations risquées avec des modèles d’options
by Asshvin Gajadharsingh et Van Son Lai                                       

Valeur extrême et l’estimation de la prime pure en traité de réassurance en excédent de sinistre
by Mohamed Dakkoun et Mohamed El Arrouchi                    

PROFESSIONAL ARTICLES

La pratique de la finance islamique
by Issouf Soumaré                                                                      

La finance islamique – Questions pertinentes ou impertinentes ?
by André Martens                                                                        

Le risque de longévité : importance, mesure et implications (première partie)
by Patrice Boucher et Martin Boyer                                              

Australian General Insurance : Paradigm shift in Distribution Model
by Shishir Kumar                                                                       

Les nouvelles sociétés à responsabilité limitée et l’assurance de responsabilité
by Marie-Josée Teixeira                                                               

Histoire de l’assurance canadienne de l’origine jusqu’à la Confédération
by Rémi Moreau                                                                        

Current Events
under the responsibility of Rémi Moreau

1. Le séisme des Abruzzes a fait 300 morts et la reconstruction coûterait 19,2 milliards de dollars – 2. La Caisse de dépôt et placement du Québec a enregistré une perte de 39,8 milliards de dollars en 2008 – 3. La crise financière a détérioré les résultats des assureurs américains en 2008 – 4. Un plan de relance et de stabilisation pour les banques américaines –     5. Le géant bancaire suisse UBS largue un dernier montant de 22,2 milliards d’actifs toxiques – 6. Les résultats du premier assureur italien sont largement abîmés par la tourmente boursière – 7. Résultats baissiers chez le Lloyd’s – 8. L’assureur américain aig secouru une deuxième fois par l’État – 9. Le Royaume-Uni au secours du colosse Lloyds Banking Group – 10. Desjardins est lui aussi terrassé par la crise financière – 11. Kpmg frappé à son tour par la crise financière – 12. Le G-20 : une injection de plus de 1 000 milliards de dollars – 13. Les catastrophes naturelles en 2008 – 14. Forte demande sur le marché obligataire des pertes catastrophiques – 15. Stress tests pour les assureurs européens – 16. La finance islamique en France – 17. Le cigarettier américain Philip Morris condamné à payer 145 millions de dollars – 18. Les primes d’assurance de dommages en Chine en 2008 – 19. L’union dans les mutuelles – 20. Mariage français entre deux banques privées mal en point – 21. La caisse de retraite de Chrysler s’oppose au plan de sauvetage, mais essuie un refus – 22. Une loi québécoise obligeant les cigarettiers à payer les soins de santé liés au tabagisme – 23. Entrée en vigueur de la notion de « gardien du véhicule au moment du sinistre » - 24. Moins d’accidents sur les routes québécoises en 2008 – 25. La grippe A (h1n1) : la pandémie mondiale est confirmée – 26. Le coût de la tempête française Klaus en janvier – 27. Les captives d’assurance face à la crise – 28. Les banques gagnent la bataille du web dans l’assurance – 29. Le crash de l’Airbus 330 dans l’Atlantique, le 1^er juin 2009    

Subjects’ and Authors’ Index – April 2008 to January 2009    

Réplication d’obligations risquées avec des modèles d’options
by Asshvin Gajadharsingh et Van Son Lai

High yield bonds (HYB) behave as equity unlike investment grade high quality bonds which are strongly correlated with government debts. This means that it is possible to replicate HYB performance using assets which are close to equity. Using equity option model (Black Scholes (1973)) combined with credit structural model (Merton (1974)) we extend Ramaswami (1991) and Hussain (1993) works to reproduce the performance of HYB by way of constructing synthetic portfolios. To assess the performance of the replication hedging strategies, we test our theoretical model on various bonds (namely of Ford, General Motors and Rite Aid) which are traded in the market. We find that D – G – Q based hedging strategies perform best when risky bond returns volatilities are closed to those of firm equity.

Valeur extrême et l’estimation de la prime pure en traité de réassurance en excédent de sinistre
by Mohamed Dakkoun et Mohamed El Arrouchi

Extreme values, so rare they are, can cause considerable damage in several sectors and especially in the finance and insurance. In this paper, we consider the estimation of insurance premiums for excess-of-loss reinsurance policies in excess of a high retention level. In the first step, we’ll use the results of extreme value theory for pricing these larger costs of claims by two approaches: non-parametric and semi-parametric. In the second step, we will present an application of such approaches on real insurance data from Zurich Insurance Company in Tanger, Morocco.

Keywords:       Extreme value; extreme value index; excess-of-loss reinsurance; net premium.

Protecting directors and officers against liability arising from aggressive earnings management
by Martin Boyer and Amandine Hanon

A lingering topic in corporate governance is whether corporate directors should be protected against shareholder lawsuits and whether such protection reduces the incentives of directors to monitor appropriately the behavior of corporate officers. To achieve this goal, we examine whether corporations whose corporate managers’ wealth is protected under a directors’ and officers’ liability insurance policy (D&O insurance hereafter) are more to report accounting results aggressively. Using discretionary accruals as our measure of accounting aggressiveness, the results in our paper suggest that the magnitude of discretionary accruals has no real impact on the demand for D&O insurance, be it on the decision to purchase insurance or on the amount of limit chosen. The positivity of discretionary accruals appears, however, to have an impact on the decision to purchase insurance. Surprisingly, although these insurance policies protect directors and officers in the event they make a “mistake” in their role as representatives of the company, directors do not seem to see this as an invitation to be a little less careful when overseeing the firm’s accounting practices.

La pratique de la finance islamique
by Issouf Soumaré

Islamic finance prohibits the charge of interests (riba), being usury under Islamic law (Sharia), and promotes profit and loss sharing. Over the past years, Islamic financial assets have grown at an average rate of more than 10%. This growth can even increase in the future, if the Islamic Financial System (IFS) succeeds in penetrating other markets beyond the Persian Gulf and South East Asia, where it is currently concentrated. Indeed, Islamic banks are underrepresented in many western countries such as France with a substantial Muslim population. Also, many large western banks have Islamic banking windows. Although, Islamic finance principles can improve the ethics of the current practice of finance, the IFS is not immune against risks facing conventional finance. Nevertheless, being at its early development stages, putting a sound risk management system will require (1) a systemic liquidity infrastructure; (2) a legal infrastructure; (3) an information infrastructure; and (4) financial safety net mechanisms.

Le risque de longévité : importance, mesure et implications (première partie)
by Patrice Boucher and Martin Boyer

How long will live a given population? The answer to this question is crucial for insurers as well as for corporations and governments that have promised benefit payments upon retirement. For Canadians the cost of certain public programs, such as Canada’s Pension Plan, depends directly on the life span of the population. This is also the case for private pension plans and the profitability of insurance companies that offer annuity services. We present in this first of three articles on longevity risk the importance, the measurement and the economic implications of longevity risk for corporations and governments.

Australian General Insurance: Paradigm shift in Distribution Model
by Shishir Kumar

Australian General insurance industry has witnessed historically strong profit. And, the profitability is expected to be strong in the years to come, as a result of continuous low enforcement and changing market dynamics. However, the industry is witnessing structural changes over the years. Government’s regulatory mechanisms to protect industry and investors are pushing small players towards consolidation. The intensified competition has also led to decline in the number of insurers and clustering amongst the local brokers. Brokers are expected to gain in the personal as well as commercial line of business in near term. Brokers’ gain in personal lines seems to be surprising.

Les nouvelles sociétés à responsabilité limitée et l’assurance de responsabilité
by Marie-Josée Teixeira

Since 2001, the Professional Code allows professionals to come together in a partnership with a limited liability partnership (L.L.P.) or a joint stock company. This article first proposes to review the liability rules of the partnership and professionals who have chosen one of the above mentioned legal forms to exercise their profession. In a second step, the issue of main liability insurance protections required for these new partnerships is examined. The author states in particular that if the mandatory professional liability insurance may be sufficient to protect the public, it is rarely enough to protect both the professional’s patrimony and their partnership estates.

Histoire de l’assurance canadienne de l’origine jusqu’à la Confédération
by Rémi Moreau

The start of modern insurance is traced to London on September 1666 when fire spread in the king’s bakeshop and nearly destroyed the City. Insurance companies against the risk of fire began at that time, following twenty years later by the marine insurance in Edward Lloyd’s Coffee House. The development of British insurance introduced the creation of fire insurance everywhere on the American continent at the end of the 18th century, including Upper and Lower Canada.

The author describes the fears and dangers under which Canadian people were living at that time, not the least was the peril of fire which could mean financial ruin for individual and major disasters for the cities. He identifies the first fire and life insurers established in Canada, as well mutual, benevolent and friendly societies. He points out the development of insurance in the 1800s, paralleled to the major economic changes over the years, to the needs for insurers to establish some rules of preventing and controlling the risks and to the Government involvement by the adoption of the first legislations and regulations till the promulgation of the British North America Act in 1867.