Corporate Management of Highly Dynamic Risks
Evidence from the Demand for Terrorism Insurance in Germany
Abstract
This paper investigates a corporation's risk management response to highly dynamic risks. Using a unique data set on the German terrorist insurance market, the paper tests whether corporate risk managers have a clear understanding of the probability distribution of highly dynamic risks or if risk managers learn from severe losses and base their decisions upon day-to-day experience. The paper further investigates whether risk managers become more confident in their risk management decisions over time. For this purpose, we apply Viscusi's prospective reference theory to a corporate context. We find that firms learn from single events when making their risk management decisions, and that risk managers become more confident with their risk management decisions over time.
Details
- Organisation(s)
-
Institute of Insurance Business Administration
- External Organisation(s)
-
Ministry of Finance, Financial Institutions and Markets
SUNY Plattsburgh
- Type
- Article
- Journal
- GENEVA Risk and Insurance Review
- Volume
- 37
- Pages
- 57-82
- No. of pages
- 26
- ISSN
- 1554-964X
- Publication date
- 03.2012
- Publication status
- Published
- Peer reviewed
- Yes
- ASJC Scopus subject areas
- Accounting, Business, Management and Accounting (miscellaneous), Finance, Economics and Econometrics
- Sustainable Development Goals
- SDG 16 - Peace, Justice and Strong Institutions
- Electronic version(s)
-
https://doi.org/10.1057/grir.2011.3 (Access:
Open
)
