Variation in organizational form across lines of property insurance: Sweden, 1913–1939

This article examines the impact of organizational structure on risk taking across different lines of property insurance (fire, marine, vehicle and specialized property insurance) in Sweden from 1913 to 1939. Based on the theoretical arguments whereby the mutual organizational form has a competitive advantage in underwriting homogeneous but unknown risk distribution, while the stock organizational form is more likely to underwrite more volatile and heterogeneous risk categories, we conclude that organizational form has a significant impact on risk taking. Our empirical analysis shows that the risk taking, measured as incurred claims to anticipated losses, was on average lower among mutual insurers. When comparing across lines of insurance, the analysis shows that the mutual form was more successful in keeping down risks in fire and marine, while less so in vehicle and specialized property insurance. Stock companies mitigated the higher risk by ceding more premiums to reinsurers and by diversifying more across different lines of insurance.

Catastrophes and Insurance Stocks – A Benchmarking Approach for Measuring Efficiency

This study uses the numeraire portfolio to benchmark insurance stock returns as a natural measure for detecting abnormal insurance stock returns from catastrophic events. The assumptions underlying the efficient markets hypothesis using a numeraire denominated returns approach hold for catastrophic insurance events whereas other more traditional methods such as the market model and Fama-French three factor model often fail, typically due to the accumulation of estimation errors. We construct a portfolio of Australian insurance firms and observe the market reaction to major insured catastrophic events. Using the numeraire denominated returns approach we observe no particular trend in the cumulative abnormal returns of insurance securities following a catastrophic event. Using both the traditional market model and the Fama-French three factor model however, we observe significantly positive cumulative abnormal returns following an insured catastrophic event. The errors inherent in the market model and three factor model for event studies are shown to be eliminated using the numeraire denominated returns approach.

A situational approach to the application of the inventory control theory to maintenance spares control

The management of maintenance spares has frequently been treated as part of the management of the total inventory in production-oriented organizations. In this article it is suggested that maintenance spares should be grouped into four categories: non-stock, usage stock, project stock and insurance stock. Rather than using a common inventory control approach to all spares, different techniques should be applied to each category. Developments in reliability-centred maintenance will result in less reliance on forecasting maintenance spares requirements, thereby permitting a higher service level without an increase in inventory carrying costs.