Projects in Progress

Many issues ripe for research stem from the economic upheaval of 2008/2009/2010. Areas of concern include our changing socio-economic dynamics, increased government controls and oversight, tighter capital investment criteria, retirement funding issues facing seniors, a possible national health program (while structural aspects of a national health care plan are outside the scope of ISI targeted work, indirect impacts of such a plan may affect other risk management issues that ISI can research), and now a possible Federal insurance charter or oversight office. Other topics raising alarm for industry stakeholders, public policymakers and consumers include solvency of annuities and pensions, adequacy of reserves, accounting practices and product delivery practices.

Utilizing a limited budget, ISI has hand-picked several intriguing projects that will carry over into 2010/2011. These studies demonstrate ISI’s ongoing commitment to research excellence and measurable results:

The sophistication of structured products has increased dramatically over the last decade. The complexities of such structures became so great that many investors were not aware of the true risk they were taking on. ISI is attempting to demystify some of these structures and provide a framework of how they can be applied to insurance-related products.

Structuring of Financial Instruments Comprised of Insurance-Related Products

Tags: Capital Markets, Derivatives, Investor, Securitization, Structured Finance

ISI is exploring traditional paradigms of longevity and the capital market developments surrounding it. Longevity/mortality shows promise as a unique new asset class as institutions attempt to remove risk from their balance sheets while investors search for alternate sources of investment returns.

Longevity Risk Management Solutions

Tags: Capital Markets, Investment, Longevity, Mortality, Risk Management

ISI provided lead funding for this breakthrough project, based at the Wharton School of Business. With assistance from the Congressional Budget Office, the study examines how the 2008/2009 financial crisis exposed gaps in the current regulatory system, and explores options for constructing an improved regulatory system through a Systemic Risk Regulator. The goal is to promote financial stability among financially interdependent institutions by lessening the likelihood of a crisis while creating ex-ante mechanisms to deal with a major financial crisis that does materialize. If the project produces demonstratable results, ISI may help to avoid future catastrophic capital market turmoil by employing this systemic risk regulator for major financial institutions.

Designing a Systemic Risk Regulator

Tags: Congressional Budget Office (CBO), Financial Crisis, Risk Management, Smetters, Wharton

ISI has been facilitating the creation of a national databank for the LISM, the goal of which is to enable stakeholders, media, public policymakers and consumers to make more informed decisions, by having access to reports, indices and analytics that can measure LISM progress and impact.

Data Collection and Maintenance System for the Life Insurance Secondary Market (LISM)

Tags: Consumers, Life Insurance Secondary Market (LISM), Policymaker

ISI provided a $100,000 grant to launch this research project, conducted by the Center for Retirement Research at Boston College. This study undertakes an empirical and theoretical analysis of the benefits that a market for life settlements offers to current and prospective policyholders. It further examines the potential effects of life settlements on the economics of underwriting life insurance; and, it utilizes its theoretical model to estimate the consequences of regulations that limit life settlements on policyholders’ welfare.

How Substantial Are the Benefits of the Life Insurance Secondary Market for Policyholders, and Insurers?

Tags: Benefits, Center for Retirement Research (CRR), Economics, Life Insurance, Life Settlement, Policyholder, Regulations, Underwriting