Finance Innovations in Insurance

FIE462 Finance Innovations in Insurance

Spring 2021

  • Topics

    The course is based on cases from the insurance industry. Each case will typically be introduced by a representative from an insurance company/industry, before it is covered in class. All cases represent situations where knowledge from finance is required, in addition to insurance. Historically, finance and insurance theory have developed independently although they have dealt with similar kind of problems. One example is the classical theory of reinsurance which inspired Jan Mossin's derivation of the famous capital asset pricing model. Another example is Thiele's differential equation in life insurance which can be seen as a predecessor of the famous Black Scholes equation from financial option pricing.  

    Examples of cases:

    - A capital asset pricing model of insurance

    - Insurance as contingent claims

    - Why do companies buy insurance?

    - Interest rate guarantees

    - Directors’ and officers’ liability insurance

    - Reverse mortgages

    All cases represent recent challenges for the insurance industry and requires knowledge about finance as well as insurance to deal with. Furthermore, the course covers newly developed insurance products, which can be analysed by current financial methods and insights.

  • Learning outcome

    After successfully completing the course, the candidate

    Knowledge:

    • Is able to discuss and have an in-depth understanding of current challenges the insurance industry.
    • Has knowledge of  financial theory.

    Skills: 

    • Can apply financial theory and modelling techniques  to problems particular to the insurance industry

    Competence:

    • Can communicate and discuss challenges faced by the insurance industry with a professional audience.

  • Teaching

    Lectures (due to the current virus situation, lectures will be live streamed)

    Guest-lectures

    Individual take home exam.

  • Recommended prerequisites

    The course is intended for students with interest in insurance.

    In this respect this  course may supplement fhe courses ECO 440 Economics of Uncertainty: Insurance and  FIE 461 Risk and insurance, which both have different perspectives.

  • Requirements for course approval

    One group assignment.

  • Assessment

    Individual 4 hour take home exam (written in English).

  • Grading Scale

    A-F

  • Computer tools

    Familiarity with spreadsheets (Excel).

    Some examples may be illustrated with the use of routines from a programming language such as R.

  • Literature

    Briys, de Varenne, 2001, Insurance: From Underwriting to Derivatives: Asset LiabilityManagement in Insurance Companies, John Wiley.

    Eechoudt, Gollier, Schlesinger, 2005, Economic and Financial Decisions under Risk, Princeton University Press.

    Lin, Officer, Zou. 2011, Directors’ and officers’ liability insurance and acquisition outcomes.Journal of Financial Economics 102:507-525.

    Miltersen, Persson, 1999, Pricing rate of return guarantees in a Heath-Jarrow-Mortonframework, Insurance: Mathematics and Economics.

    Nordahl, 2015, Hvorfor kjøper bedrifter forsikring?, Magma.

    (revised reading list will be available when the course starts)

Overview

ECTS Credits
7.5
Teaching language
English
Semester

Spring. Offered spring 2021.

Course responsible

Professor Svein-Arne Persson, Department of Finance, NHH.