Article: A pandemic business interruption insurance.
The Geneva risk and insurance review
2023 Volume 48, Issue 1, Page(s) 1–30
Abstract: We analyze how pandemic business interruption coverage can be put in place by building on capitalization mechanisms and a portfolio management strategy. As evidenced with COVID-19, pandemics affect economic sectors in differentiated ways: some are very ... ...
Abstract | We analyze how pandemic business interruption coverage can be put in place by building on capitalization mechanisms and a portfolio management strategy. As evidenced with COVID-19, pandemics affect economic sectors in differentiated ways: some are very severely affected because their activity is heavily impacted by travel bans and constraints on work organization, while others are more resistant. This opens the door to risk-coverage mechanisms based on a portfolio of financial securities, including long-short positions and options in stock markets. We show that such a strategy allows insurers to offer business interruption coverage in pandemic states, while simultaneously hedging the risks associated with alternating bullish and bearish non-pandemic states. These conclusions contrast sharply with the idea of governments being the only solution to the pandemic insurability problem. They are derived from a theoretical model of corporate risk management, and their practical relevance is illustrated by numerical simulations, using data from the French stock exchange. |
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Language | English |
Publishing date | 2023-01-25 |
Publishing country | United States |
Document type | Journal Article |
ZDB-ID | 2200403-8 |
ISSN | 1554-9658 ; 1554-964X |
ISSN (online) | 1554-9658 |
ISSN | 1554-964X |
DOI | 10.1057/s10713-023-00080-7 |
Database | MEDical Literature Analysis and Retrieval System OnLINE |
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