Category Archives: insurance

The True Cost of Government Guarantees — Take 2

February 17, 2012 – 8:25 am

As part of the fallout from last August’s bankruptcy of the Federally-backed solar firm Solyndra, the Obama Administration appointed Herbert Allison, a Republican banker and former Treasury official to review the Department of Energy’s loan guarantee program. His report was completed at the end of January and released earlier this week. It contains many useful [...]

By John Parsons | Also posted in hedging, pricing risk | Comments (0)

The True Cost of Government Guarantees

September 29, 2011 – 4:22 am

The August bankruptcy at the solar panel manufacturer Solyndra has generated a predictable political kerfluffle, since the company had received $527 million in loan guarantees from the Obama Administration. The political issues raised by the case are fair game. But I’m more interested in a more general issue: What is the true cost to taxpayers [...]

By John Parsons | Also posted in hedging, pricing risk | Comments (1)

Insuring against snow storms with futures?

February 9, 2011 – 10:47 am

NPR ran a story this week on how airlines and other business are using futures contracts on snowfall “as a type of insurance policy against the weather.” Weather derivatives can be a useful instrument for hedging, and hedging is a kind of insurance policy. But it is useful to keep in mind how a futures [...]

By John Parsons & Antonio Mello | Also posted in commodities, hedging | Comments (1)

Catastrophe risks: the US National Flood Insurance Program

December 12, 2010 – 9:55 pm

An interesting analysis of the US National Flood Insurance Program by Erwann Michel-Kerjan appeared in this Fall’s issue of the Journal of Economic Perspectives. One key issue in evaluating the program and its payouts versus premiums is assessing the probability of extreme events–always an issue in catastrophe insurance. Another key issue is incentives to game [...]

By John Parsons | Also posted in incentives | Comments (0)
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