Rising from the Ashes: A Governance Perspective on Emerging Systemic Risks
Unpredictable events -like an infrastructure failure such as a blackout (e.g. the 1999 southern Brazil blackout or the northeast blackout of 2003 that occurred in the US and Canada), a large-scale financial crisis with deep consequences on the real economy (e.g. the Icelandic and the Greek crises), a non-conventional terrorist attack (committed with chemical, biological, radiological, nuclear weapons), the risk related to the exploitation of new technologies (typically nanotechnologies), or a geophysical event (as the 2010 volcanic ash crisis or the 2011 Japan earthquake) - may suddenly cause large-scale losses. The knock-on effect of these events grows beyond the direct social and economic impact on a specific geographic area, affecting simultaneously different regions and imposing immediate regulatory answers.
An optimal co-reinsurance strategy
This article considers a co-reinsurance strategy that (1) protects insurance companies against catastrophic risks; (2) enables insurers to gather sufficient information about the different risk attitudes of reinsurers and diversify their reinsured risks; (3) enables insurers to create better risk-sharing profiles by balancing the risk tolerances of reinsurers; (4) has the benefit of allowing reinsurers to accumulate experience with risks with which they are unfamiliar; (5) reduces the overall direct cost of a reinsurance contract; (6) allows a government to back some insurance products, such as the terrorism insurance programs that were established in many countries after the September 11th terrorist attacks; and (7) reflects the practical reinsurance industry of some countries, such as Iran. Such a co-reinsurance strategy can be fully determined by estimating its parameters whenever three optimal criteria are satisfied and prior information about the unknown parameters is available. Two simulation-based studies have been conducted to demonstrate (1) the practical applications of our findings and (2) the possible impact of any type of dependency between the co-reinsurance’s parameters and the evaluated optimal co-reinsurance strategy.
Operational implications of airborne volcanic ash
Abstract Volcanic ash clouds pose a real threat to aircraft safety. The ash is abrasive and capable of causing serious damage to aircraft engines, control surfaces, windshields, and landing lights. In addition, ash can clog the pitot—static systems, which determine wind speed and altitude, and damage sensors used to fly the aircraft. To ensure aviation safety, a warning system should be capable of a 5—min response time once an eruption has been detected. Pilots are the last link in the chain of safety actions to avoid or mitigate encounters with volcanic ash. For the pilots to be effective, the warning and safety system must meet their needs. The ability to issue accurate and timely warnings, advisories, and forecasts requires a rapid means to detect and continually track the ash cloud and smooth coordination between many agencies. The current operational ash detection technique uses satellite remote sensing. Potential problems with this technique and the potential impact of these problems on aircraft saf...