Paper Title: Public Horses vs Private Ponies: Structural analysis of Indian Insurance Industry
Author (S) : Subir Sen, S Madheswaran
Abstract              
Industry concentration analysis is a complex issue and complexities increases when one tries to understand the structure of the industry using the different available measures of concentration. This paper tries to analyse the structure of the Indian insurance industry using the limited information available after it went through a phase of openness following liberalisation of the industry in 1999. Under the aegis of IRDA, the entry of private firms with their foreign partners is expected to challenge the existing public sector domination in this sector. After five years, we still witness the domination of the public entities but private sector firms are gradually coming up in the foray for profits. The econometric analysis is carried out to select the best measure of concentration from a set of eight concentration ratios of largest firms and Herfindahl index. The analysis done separately for the life segment as well as non-life segment suggests that although Indian market is one of the cherished destinations for many heavy weight global insurers and forecasts of insurance business share to rise in the total financial sector business, for the time being it’s the public sector firms takes together enjoying lions share of the industry. Theoretical lessons suggest a monopolistic structure based on the assumption that all firms are selling homogeneous insurance products. The scenario is expected to remain the same if you assume heterogeneity as the IRDA closely monitors the products and is strict on the pricing part too. However, interesting would be to note why such monopolistic outcomes are at sight. Since the industry is very nascent, we restrict our analysis only to predicting the number of firms possibly in association or controlling the business.

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Paper Title: “Insurers’ Risk-Return Management: Some insights”
Author (S) : V. Jayalakshmi
Abstract              
With the increasing convergence of financial institutions, the financial products as well as the risk exposures of all the constituents of the financial markets is also becoming similar. As a result, insurance companies are now facing challenges from within the industry and as well from other players in the financial markets. Therefore, insurance companies, today need to efficiently manage their unique risks as well as financial risk exposures. On the other hand, like any other financial intermediary, insurance companies also need to maximize the interests of their policyholders and shareholders, by maximizing the returns from their investments. All this calls for good financial or money management rather than mortality or morbidity management. This paper aims to focus on the risks exposures of insurance companies, which have serious financial implications, and the risk management techniques adapted by insurance companies, to strike a trade off between risk and return.

•      What are the challenges faced by insurance companies today?
•      What is the specialty of insurance companies?
•      What are the actuarial and the financial risks of these companies?
•      Why do these companies manage these risks and how?
•      Where and how do they make their investments?
•      How do they strike a risk-return trade off?

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Paper Title: Stock Analyst’s Compensation Structure
Author (S) :  Koji Kojima, Mahito Okura, Yen H. Tong
Abstract              
Recent scrutiny on stock analysts’ compensation structure has lead to debates on linking stock analysts’ pay to investment banking revenues.  Some suggest that biased research arising from linking stock analysts’ pay to investment-banking revenues will adversely affect investment banks’ long-run profits. They caution that the short-run gains from generating large investment-banking fees from optimistic calls on stocks will be overshadowed by the long-run loss from reputation damage and legal actions from mislead investors. On the other hand, some suggest that that the complete separation of research from investment banking is non-optimal. Rather, building the right relationships with firms allows the stock analysts to provide better insights and analysis in their research. In order to shed some light on the debates, we use a multi-tasks principal-agent model to examine the effects of using research quality and investment-banking revenues as performance measures in analysts’ compensation. The results derived from the model show that neither research quality or investment-banking revenues as sole performance measure is desirable. Rather, investment banks are strictly better off using both performance measures when compensating stock analysts. Our results suggest that to totally de-link stock analysts’ compensation from investment-banking revenues might not be optimal for investment banks.

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Paper Title: Viewing Microinsurance As A Social Risk Management Instrument: Potential
and Limitations
Author (S) : Jeffrey Alwang, Paul B. Siegel, Sudharshan Canagarajah
Abstract              
The objectives of this paper are to highlight some of the potential and limitations of microinsurance in the context of Social Risk Management (SRM) framework to stimulate further discussion. The paper draws on existing literature on SRM and microinsurance. Where relevant, it invokes lessons from microfinance.
The authors conclude that there is potential for efficient and equitable risk management through microinsurance, but also limitations. Microinsurance may be an acceptable means of managing a few limited forms of risk, but not all. SRM practitioners need to recognize that effectiveness of any risk management instrument depends on the nature of risks, household and group characteristics and dynamics, and the availability of alterative risk management options.
SRM options should strike a balance between household risk management activities and the multiple instruments available at different institutional levels, including informal, market-based, and publicly provided mechanisms. Microinsurance is a potential part of the SRM toolbox, but risk management can be enhanced through different mechanisms or combinations of them.