Enclosed is a copy of the Board of Governors’ Semiannual Agenda of Regulations for the period August 1, 1980 through February 1, 1981. The Semiannual Agenda provides you with information on those regulatory matters that the Board now has under consideration or anticipates considering over the next six months, and is divided into three parts: (1) regulatory matters that the Board had considered during the previous six months on which final action has been taken; (2) regulatory matters that have been proposed for public comment and that require further Board consideration; and (3) regulatory matters that the Board may consider over the next six months.

Federal Reserve Bank of New Yorkの制定せる財務諸表様式について

Enterprise risk management (ERM) has been the topic of increased media attention in recent years. The objective of this study is to measure the extent to which specific firms have implemented ERM programs and, then, to assess the value implications of these programs. We focus our attention in this study on U.S. insurers in order to control for differences that might arise from regulatory and market differences across industries. We simultaneously model the determinants of ERM and the effect of ERM on firm value. We estimate the effect of ERM on Tobin's Q, a standard proxy for firm value. We find a positive relation between firm value and the use of ERM. The ERM premium of roughly 20 percent is statistically and economically significant.

https://www.jstor.org/stable/info/41350401

The Value of Enterprise Risk Management

If shareholders own diversified portfolios, and if companies impose externalities on one another, shareholders do not want value maximization to be corporate policy. Instead, shareholders want companies to maximize portfolio values. This occurs when firms internalize between-firm externalities. Any kind of externality, pecuniary or nonpecuniary, vertical or horizontal, suffices. What matters is simply that one company's actions affect another's value. Thus, besides the traditional benefit of risk reduction, portfolio diversifi? cation offers additional benefits to shareholders through helping internalize externalities. This paper documents the extent of diversification and cross-ownership of stocks among companies where these externalities are likely to be large and provides a capital market test of how merger offers vary with the extent of cross-ownership.

Externalities and Corporate Objectives in a World with Diversified Shareholder/Consumers

It has often been observed that homeowners fail to purchase disaster insurance. Explanations have ranged from behavioural biases to information search costs. We show that the decision to forego disaster insurance may be quite rational. Solvency-constrained insurers are required to have access to enough capital to cover a particular percentile of their aggregate loss distribution. When insuring risks with loss distributions characterised by fat tails, micro-correlations or tail dependence, insurers need to charge a price that is many times the expected loss in order to meet their solvency constraint. Homeowners, facing a budget constraint and a constraint that their utility with insurance exceeds that without it, may find the required loadings too high to make insurance purchase an optimal decision.

https://link.springer.com/content/pdf/10.1057%2Fgpp.2012.14.pdf

Explaining the failure to insure catastrophic risks

Understanding Consumer Privacy: A Review and Future Directions The evolution of marketing from a production orientation to a market orientation (Kieth 1960; Kotler and Zaltman 1971), as exemplified by the marketing concept (Barksdale and Darden 1971; Houston 1986; McKitterick 1957), has led to a dramatic increase in the need to understand the consumer. While application of this market orientation approach, especially in the forms of direct and relationship marketing, arguably brings multiple benefits to both consumers and firms (Kohli and Jaworski 1990; Narver and Slater 1990), it also requires a large amount of consumer information in order to deliver value (Nowak and Phelps 1997). The widespread adoption of information technology (IT) has allowed firms to meet this need for consumer information by vastly increasing the amount and types of information they collect (McCrohan 1989; Thomas and Maurer 1997). For firms, advances in IT have considerably enhanced the institutionalization and utilization of the market orientation approach by providing the technological infrastructure to capture, analyze, and maintain large quantities of consumer information (Winer 2001). For consumers, though, the collection and analysis of their personal information has led to an increase in privacy concerns (Foxman and Kilcoyne 1993; Phelps, Nowak, and Ferrell 2000). While most consumers welcome the increased convenience and personalization that these various marketing orientation approaches provide, many are concerned about the collection, use, and protection of their personal information (Phelps et al. 2000; Rust, Kaman, and Peng 2002). Given the sharp increases in unsolicited promotions, incidences of identity theft, and the negligent loss of consumer information by firms, these fears are not altogether unwarranted (Levy and Stone 2005). For many consumers, major privacy concerns fall into three main categories: (1) notification, (2) control, and (3) security. First, many consumers want to be informed about the collection and use of their personal information by firms (Dommeyer and Gross 2003; Milne and Culnan 2004; Nowak and Phelps 1995), Second, consumers want to feel that they have some control over the collection of their personal information and the sharing of this information among firms (Goodwin 1991; Milne and Boza 1999; Phelps et al. 2000). Third, most consumers want some assurance that the personal information they provide to firms, especially online, and the storage of this information is secure (Hoy and Phelps 2003; Jones 1991; Miyazaki and Fernandez 2000). Although multiple legal, commercial, and technological solutions have been proposed to address these concerns (Foxman and Kilcoyne 1993; Goodwin 1991; Phelps et al. 2000), the protection of consumer privacy remains a constant concern for consumers and a formidable challenge for businesses. In an attempt to understand these issues, consumer privacy research has sought to define the concept of consumer privacy, outline the privacy expectations and strategies of both consumers and businesses, and examine the degree to which firm's are providing adequate consumer privacy protection. While this body of research has provided us with valuable information concerning these issues, there currently does not exist a review that synthesizes and analyzes the current state of consumer privacy research. Given the complexity of the topic and the diversity of issues that have been explored, we feel that a comprehensive review is necessary to refine our understanding of this important topic and to take consumer privacy to a more advanced theoretical level. As a result, the purpose of this article is to examine the general concept of privacy in order to situate and define the domain of consumer privacy, review the literature on consumer privacy in order to determine what we know, and provide directions for future research in order to address gaps in the literature. …

/pdf/understanding-consumer-privacy-a-review-and-future-1qmmogq15j.pdf

Understanding Consumer Privacy: A Review and Future Directions

This research examines the decision to purchase earthquake insurance by analyzing data on earthquake insurance price and penetration in the New Madrid fault zone in Missouri. Earthquake risk is of concern to consumers, the insurance industry, industry regulators, and government agencies because of the potentially catastrophic nature of losses resulting from a major earthquake. Despite the significance of the earthquake peril, the recent literature does not contain estimates of the price and income elasticity of the demand for earthquake insurance. Our analysis indicates that homeowners acquire earthquake insurance because of risk considerations, at higher levels of risk the demand for earthquake insurance is higher, and the price of earthquake coverage does not provide incremental information in explaining the demand for earthquake coverage.

An Analysis of the Demand for Earthquake Insurance

Risk management has a central role in corporate America. Insurance companies frequently manage risk by purchasing reinsurance because it reduces the downside risk (i.e., bankruptcy risk) of an insurer. Because reinsurance is costly, Mayers and Smith (1990, Journal of Business, 63: 19-40) argue that reinsurance purchases should be negatively associated with the diversification of the owners' portfolios. Further, institutional owners play a significant role in equity markets yet we know little about their effect on firm behavior. The purpose of this study is to examine empirically the influence of institutional ownership on reinsurance for a sample of widely held property-liability insurers. We hypothesize that insurers with higher levels of institutional ownership purchase less reinsurance. Using a sample of 45 publicly traded property-liability insurers from 1995 to 1997, we demonstrate that the utilization of reinsurance decreases as the level of institutional ownership increases. This suggests that the diversification of the owners' portfolios is a determinant of the insurers' reinsurance decisions. INTRODUCTION Risk management has a central role in corporate America. Organizations spend a considerable amount of resources on the treatment of risk. By identifying risks, analyzing and evaluating risks, and properly selecting appropriate risk treatment methods, an organization can minimize the cost of risk and help to maximize the value of the firm. Insurance companies frequently manage risk by purchasing reinsurance because it reduces the downside risk (i.e., bankruptcy risk) of an insurer. Because reinsurance is costly, Mayers and Smith (1990) argue that reinsurance purchases should be negatively associated with the diversification of the owners' portfolios. Consistent with their prediction, they find that widely held property-liability insurers purchase less reinsurance than closely held, single-owner, and association-owned property-liability insurers. Further, institutional ownership plays a significant role in equity markets. In 1997, institutional investors controlled 55 percent of U.S. equities (Hubbard, Houminer, and Downes, 1999) yet we know little about their effect on firm behavior. Most research (see Karpoff, 1988; Black, 1998) in this area focuses on the effect of institutional ownership on performance and governance structure. Despite the significance of risk management and institutional ownership, there are few, if any, studies that explore the relationship between the two. The purpose of this study is to extend these two lines of research by empirically examining the influence of institutional ownership on reinsurance for a sample of widely held property-liability insurers. Institutional investors are comprised of organizations with at least $100 million of assets under management, including banks, insurance companies, mutual funds, brokerage firms, pension funds, and university endowments. Because institutional investors are generally well diversified, we hypothesize that insurers with higher levels of institutional ownership purchase less reinsurance. We test our hypothesis by estimating an ordinary least squares model (OLS) for a sample of 45 publicly traded property-liability insurers from 1995 to 1997. Consistent with our prediction, we demonstrate that the utilization of reinsurance decreases as the level of institutional ownership increases. This suggests that the diversification of the owners' portfolios is a determinant of the insurers' reinsurance decisions. Our result is robust to controlling for the economic determinants of reinsurance identified in prior literature as well as managerial holdings of stock and stock options that may affect the managers' incentive to purchase reinsurance. It is possible that factors contributing to the level of reinsurance purchases also contribute to the level of institutional ownership. Therefore, we also estimate a two-stage least squares (2SLS) model in which institutional ownership is endogenously determined. …

The Impact of Institutional Ownership on the Reinsurance Decision

The Market Effects of Life Insurer Insolvencies and the Implications for Regulators

In this paper we examine the prevailing level and structure of executive compensation within the insurance industry. We analyze the level of base pay, annual bonus, long-term compensation, and option grants of 836 executive positions at 92 companies of various sizes in 1999 and 2001. The data allow an introspective look at the manner in which the top management teams within the insurance industry were compensated during this period, and extend previous studies on insurance executive compensation beyond the CEO position. We examine the level of compensation across executive rank and find evidence supporting the tournament compensation model. We also find that compensation structure across executive pay ranks is similar within small and medium-size insurance companies but different within large companies.

The Level and Structure of Executive Compensation within the Insurance Industry

This article examines the use of a Personal Lines Risk Management and Insurance Simulation Game in an introductory risk management and insurance (RMI) course. Business simulations and other case study teaching methods are a way to increase student engagement in the classroom, which can translate into a greater likelihood of higher learning outcomes. Because no one knows for sure what will happen in the future, there is a fundamental trade-off that influences all RMI decisions: incur a known cost today in order to reduce risk in the future even though a loss may never materialize or refuse the immediate cost that would have reduced risk even though a future loss event might still occur. It is difficult to convince students of the consequences of such decisions because most realize that the individual likelihood of suffering an insurable loss is quite small. Students also fail to understand the complexity of making these trade-off decisions multiple times in a given period for each different loss exposure they face. A description of the purpose of the game, innovative features, Smith Family Case Study, game specifics, and objectives and grading for the game have been provided. This article can be used as a step-by-step guide to implement this simulation in RMI courses at other universities to increase student engagement and enhance student learning.INTRODUCTIONFor individuals and families, risk management and insurance (RMI) decisions play a large part in determining financial success and financial setbacks. A risk management program can reduce risk and make sure that appropriate risk control and risk financing techniques are utilized to reduce the overall cost of risk. This article summarizes the use of a personal lines risk management and insurance simulation game that provides students with the opportunity to make risk management decisions given a set of probabilistic scenarios with potential losses. Students witness how their decisions affect the overall net worth of a case study family for whom they are making these decisions. In this article, we begin by identifying the purpose of the game. This is followed by a description of the innovative features of the game, including a detailed look at each of the four game stages that take place through the lens of the Smith Family Case Study. We also discuss the transferability of the game to other academic institutions, provide feedback from students about the benefits of using the game as an instructional tool, and offer concluding remarks. The appendices include the Smith Family Case Study, a sample student paper produced for the game, and the game's objectives, rules, and grading requirements that are handed out to students at the beginning of the game.PURPOSE OF THE GAMEBusiness simulations and other case study teaching methods are a tried and true way to significantly increase student engagement in the classroom, which can translate into a greater likelihood of higher learning outcomes. Many publishers provide the mainstream disciplines with various simulations; however, none exist for RMI. This is unfortunate because RMI students could benefit tremendously from such an approach given the nature of the subject.The subject of RMI is all about the concept of risk, which by most definitions is future uncertainty or the possibility that a future outcome will be different than expected. Because no one knows for sure what will happen in the future, there is a fundamental trade-off that influences all RMI decisions: incur a known cost today in order to reduce risk in the future even though a loss may never materialize or refuse the immediate cost that would have reduced risk even though a future loss event might still occur. It is difficult to convince students of the consequences of such decisions because most realize that the individual likelihood of suffering an insurable loss is quite small. Students also fail to understand the complexity of making these trade-off decisions multiple times in a given period for each different loss exposure they face. …

Personal Lines Risk Management and Insurance Simulation Game

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