2013 Awards for Excellence
Article Type: 2013 Awards for Excellence From: The Journal of Risk Finance, Volume 15, Issue 1
The following article was selected for this year's Outstanding Paper Award for The Journal of Risk Finance
"The merits of pooling claims revisited"
Nadine Gatzert
Friedrich-Alexander-University of Erlangen-Nuremberg, Nuremberg, Germany
Hato Schmeiser
Institute of Insurance Economics, University of St Gallen, St Gallen, Switzerland
Purpose – Definitions of pooling effects in insurance companies may convey the impression that the achieved risk reduction effect will be beneficial for policyholders, since typically lower premiums are paid for the same safety level with an increasing number of insureds, or a higher safety level is achieved for a given premium level for all pool members. However, this view is misleading and the purpose of this paper is to reexamine this apparent merit of pooling from the policyholder's perspective. This is achieved by comparing several valuation approaches for the policyholders' claims using different assumptions of the individual policyholder's ability to replicate the contract's cash flows and claims. The paper shows that the two considered definitions of risk pooling do not offer insight into the question of whether pooling is actually beneficial for policyholders. The paper contributes to the literature by extending and combining previous work, focusing on the merits of pooling claims (using the two definitions above) from the policyholder's perspective using different valuation approaches.
Design/methodology/approach –
Findings –
Originality/value –
Keywords: Insurance, Risk finance, Risk management, Risk pooling, Risk valuation, Theory of risk
This article originally appeared in Volume 13 Number 3, 2012, The Journal of Risk Finance
The following articles were selected for this year's Highly Commended Award
"Long term versus warm phase, part I: hurricane frequency analysis"
Siamak Daneshvaran and Maryam Haji
This article originally appeared in Volume 13 Number 2, 2012, The Journal of Risk Finance
"Market-consistent embedded value in non-life insurance: how to measure it and why"
Dorothea Diers, Martin Eling, Christian Kraus, Andreas Reuß
This article originally appeared in Volume 13 Number 4, 2012, The Journal of Risk Finance
"Pricing temperature-based weather derivatives in China"
Ahmet Göncü
This article originally appeared in Volume 13 Number 1, 2012, The Journal of Risk Finance
