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Course Outline for Insurance Operations
Fall 2017
Finance 3055 Insurance Company Operations Dr. A. Frank Thompson
Section 01 12-12:50 AM MWF Curris Business Building CBB 24
Section 02 1 - 1:50 PM MWF Curris Business Building CBB 24
Office Hours: 11 AM - 11:50 AM, MWF and by appointment
Course Description: In-depth study of management issues unique to insurance operations and companies from a functional perspective. Pre-requisite(s) 120:130; 120:031; C- or better in 160:151; 800:072 or 800:092; 920:053; 920:054; 920:070; junior standing (Variable)
Reading Materials:
(1) Ann E. Myhr, and James J. Markham, Insurance Operations, Regulation and Statutory Accounting, Second Edition, American Institute for CPCU, Malvern, PA, 2004.
(2) Frank Partnoy, FIASCO, Penguin Books, 1997.
(3) 2002-09 Berkshire Hathaway Annual Reports
Selected Reference Research Publications:
[1] A. Frank Thompson, Linda Bowyer, and V. Srinivasan, “The Ohio Banking Crisis: A Lesson in Consumer Finance, “ The Journal of Consumer Affairs, Vol. 20, #20 (Spring 1986), pp. 290-299.
[2] A. Frank Thompson, and Linda Bowyer, “Using Financial Futures to Hedge Interest-Rate Risk on Paid-Loss Retrospective Insurance Programs, “ The Journal of Insurance Issues and Practices, Vol. II, No. 2(June 1984), pp. 1-10.
[3] A. Frank Thompson, Roger D. Rutz, and Frederic Stiner, Jr., “Fidelity Insurance: Are there Differences in Experience Among Financial Institutions, “ Federal Home Loan Bank Board Journal, Vol. XVI, No. 2(February 1983), pp. 2-7.
[4] A. Frank Thompson, Linda Bowyer, and A. Bhattacharya, “Theoretical Propositions on the Effect Minimum Net Worth Requirements have on Insolvency and Bankruptcy for Stock S&Ls,” Invited Research Working Paper No. 51, Federal Home Loan Bank Board, Office of Policy and Economic Research, Washington, D.C., (March 1985).
[5] A. Frank Thompson, Anju Ramjee, and B. Ramjee, “Pension Valuation and Unfunded Liability Measurement: Financial Management Implications,” 1984 Proceedings of the Risk Theory Seminar, University of Southern California.
[6] A. Frank Thompson, Yong H. Kim, and Philip W. Glasgo, “Pension Liability Reporting under ERISA,” The International Foundation of Employee Benefits Journal, (March 1983), pp. 2-8.
[7] Philip W. Glasgo, William Landes, and A. Frank Thompson, “Bank Discount, Coupon Equivalent and Compound Yields,” Financial Management, Vol. II, No. 3(Autumn 1982), pp. 80-84.
[8] A. Frank Thompson, “Wraparound RAMS: A New Method for Providing Lifetime Annuities,” Federal Home Loan Bank Board Journal, Vol. XIL, No. 6(June 1981), pp. 17-19.
[9] A. Frank Thompson, “Immunization of Pension Funds and Sensitivity to Actuarial Assumptions: Comment,” Journal of Risk and Insurance, Vol. XLVIII, No. 1(March 1981), pp. 148-153.
[10] R. Yeager, “How Safe is Your Bank,” Reader’s Digest, March 1988.
[11] Nancy L. Ross, “Investors Having Doubts About High-Yield Saving,” The Washington Post, August 15, 1982, Business Section.
[12] A. Frank Thompson and Frederic M. Stiner, Jr. , “The Cyclic Behavior of U.S. Government Bonds Using Stochastic Time Series,” Business Economics, (September 1980), pp. 55-58.
[13] A. Frank Thompson, “Homeowner’s Equity: Providing Lifetime Annuities for the Elderly,” Federal Home Loan Bank Board Journal, Vol. XIII, No. 12(December 1980), pp. 23-28.
[14] A. Frank Thompson, Linda Bowyer, and Don Edwards, “A Cross-Sectional Analysis of Interest-Rate Swap Agreements Among FSLIC-Insured Thrift Institutions,” Research Working Paper No. 132, Federal Home Loan Bank Board, Washington, D.C., July 1987.
[15] A. Frank Thompson, and Frederic M. Stiner, Jr., “An Examination of Auditor Concentration in the S&L Industry,” Federal Home Loan Bank Board Journal, Vol. 17, No. 1(1984), pp. 10-15.
PFGBest Failure Literature:
Time LIne on the Wasendorf PFGBest FraudConsequences of Wasendorf Fraud
Presentation at Rutgers University by Brian Fox from Confirmation.com on the Chronology and Root Cause of the Audit Fraud
http://raw.rutgers.edu/docs/wcars/26wcars/26WCARS_Presentations/Brian%20Fox/Brian_Fox_WCARS%202012_PPT_Confirmation.pdfWasendorf Donated $2 Million to the UNI Athletic Department During the Fraud
Wasendorf Received Character Counts Award During Fraud
Lessons from the PFGBest Financial Fraud
Recent Publication on SIPC and Broker Fraud
Consequences of the Wassendorf FraudFor the Week of: Reading/Learning Assignments
The course will be divided into three parts, the first 7 weeks will be spent covering the fundamentals of insurance company operations within the context of functional home and field office activities, regulatory history and framework, as well as, Statutory/GAAP accounting followed by the first exam during the week of October 3rd. The second part of the course will entail a more detailed look at the various functional areas within the insurance operation followed by another exam on November 14th The third set of material will cover contemporary events that have impacted insurance as a financial intermediary in the US economy dealing specifically with the issues of reinsurance, investments, and financial statement analysis. Since each section builds on material from the previous set of material, each exam will include concepts taught up to that point in the course. The final exam will be comprehensive and cover material offered throughout the course.
For the Week of: Reading/Learning Assignments
August 21st Chapter 1: Risk Management and the Role of Insurers In Addressing Risk
Chapter 2: Insurance History, Rationale and Evolution of Insurance Regulation
2002 Berkshire Hathaway Annual Report on Economics, Underwriting and the Threat of Derivatives to Insurance Operations, pp. 7-20.
August 28th Chapter 3, Insurance Marketing and Agent Responsibilities
September 4th Chapter 4, The Underwriting Process as a Key to Insurer Viability
Note: September 4th is a University holiday in commemoration to American workers, recognizing the role of labor unions as a countervailing influence on business activities intended to bring about,and foster, best business practices.
September 11th Chapter 5 and 6: Covering Property and Liability Risks
September 18th Chapter 7: Ratemaking and the Development of Credible Premium
September 25th Chapter 8: The Claim Settlement Process
Readings for Writing Assignment on the Property/Casualty Underwriting Cycle
Writing Assignment Due November 16th
Brief Information from our text on the Underwriting Cycle: Section 2.30 Regulating Insurance Rates
General Information on Insurance Underwriting Cycle
A Game Theoretic View of Oligopoly Participants -The Ohio State Economics Dept.General Information on Oligopolistic Markets
A. Frank Thompson, Linda Bowyer, and Don Edwards, “A Cross-Sectional Analysis of Interest-Rate Swap Agreements Among FSLIC-Insured Thrift Institutions,” Research Working Paper No. 132, Federal Home Loan Bank Board, Washington, D.C., July 1987..
Recent Information on the Financial Economic Characteristics of the Insurance Business that Impact Product Pricing
2000 Berkshire Hathaway Annual Report -"The Economics of Property Casualty Insurance," pp. 8-15.
2002 Berkshire Hathaway Annual Report -"Derivatives and Corporate Management," pp. 13-17.
2010 Berkshire Hathaway Annual Report on the Responsibilities of Business Leadership, Reserve Adequacy and Difficulties of Using Black Scholes to Value Long Term Options, pp. 14-24.Recently Published Article on Externalities Related to PBGC Insurance
Followup Article in NY Times Citing PBGC Research
October 2nd Chapter 11: Reinsurance Contracts, Strategies, Regulation
Review Topics for First Exam on October 4th
Exam 1 [100 Points - Risk Management, Insurance History/Regulation, Underwriting and Claims settlement, Insurance Marketing, Fundamentals of Insurance Operations [October 8th]
October 9th Chapter 12: Insurer Financial Statements - Regulatory Standards
October 16th Chapter 13: Using Financial Information to Determine Financial Strength
October 23rd Chapter 14: Financial Management of Insurance Operations: Loss-Reserving
October 30th Risk-Based Capital Requirements, Investment Strategies, Contingent Claims Analysis
November 8th Chapter 9: Claims Settlement in Casualty and Life Insurance Operations
Investment Policies in Life and P&C Insurance Operations/ Reinsurance Chapter 11
November 13th Exam 2 [100 points]Underwriting, Claim Settlement, Reserving, Actuarial Principles
November 20st Introduction to Life Contingencies
The university Thanksgiving break begins after class on November 20th, and classes resume on Novmeber 24th. Travel safely and make sure you carry adequate insurance coverage.
November 27th Insurer Financial Statements and Management Strategies Chapter 14
December 4th - 8th International Insurance Operations -- AEG, AIG and ING operations in Iowa
Regulatory Reform in the Aftermath of the Madoff, MF Global and PFGBest Scandals
Review of New Legislation Relating to Insurance Regulation/To Big to Fail Concept
Week of December 11th Final Exam (100 points)
Exam Time and Date
Section 01: Monday, December 11th 1:00 - 2:50 PM in CBB 24
Section 02: Tuesday, December 12th 1:00 - 2:50 PM in CBB 24
Grading Policy: Your course grade will be based on (1) accumulation of total points from exams, quizzes, homework and outside assignments, (2) meaningful class participation and (3) work with class projects .
Grades will be determined by taking the highest student score and then applying grade lines using a 2% incremental standard from 100% based on the average of your three highest assignment scores in the class. The final grade will be decided on the basis of your three highest scores from each of the graded assignments, plus any extra credit earned through supplementary work. Within the course there may be extra credit assignment points that will count in addition to the regular points earned in this class. These extra credit assignments will be offered in addition to regular course work, to reward attendance, allow for critical thinking, writing opportunities that provide additional means for applying concepts in the course to practical problems involving insurance operations. On all written assignments you will be expected to reference the work of others, develop a reasoned and cogent set of arguments, and produce papers free from grammatical errors. I am willing to review written work during office hours prior to its being turned in to provide feedback on how papers may be improved. If my office hours are inconvenient, send me an e-mail in order to arrange for a meeting time that may be more mutually agreeable. The regular exams will test over material covered in lecture, text material, and information contained in FIASCO, published papers referenced on this website, as well as, the Berkshire Hathway Annual reports, and material related to the recent PFGBest financial failure and the fraud perpetrated by Russell Wassendorf Sr. At least 10% of this course will be spent investigating the history, motivations, consequences, role of government regulation and obligations of employees to report ethical lapses in business.
The usual caveats with respect to this class are the same as with any UNI course. Students are expected to be familiar with the rules of the University and College concerning its academic ethics policy. You may obtain a copy of this policy through the Undergraduate Programs Office in Room 321B of the Business Building. With respect to any outside assignments, you are expected to fully cite the work of others. Any work turned in for this course whether a regular assignment, or extra credit project, will be deemed subject to this policy. Failure to fully cite the work of others in an assignment turned in for this course will result in a class grade of F.
Special Needs Considerations: UNI is an Affirmative Action Equal Opportunity Institution. The Americans with Disabilities Act of 1990 provides protection from
discrimination for qualified individuals with disabilities. Students with a disability, who require assistance, will need to contact
the Office of Disability Services (ODS) for coordination of academic
accommodations. The ODS is located
in 213 Student Services Center. Their
phone number is 319/273-2676. Those students requiring special needs accomodation will need to provide the necessary form from the UNI Office of Disability Services to me during the first week of class, in order to complete the form and begin accomodation.
Opportunities to Improve Liberal Arts Skills
You are encouraged to consider using UNI's Academic Learning Center for free assistance with writing, math, reading, and learning strategies: Upon graduation from UNI, you will be evaluated by employers on the basis of your abilities in these areas, as well as, skills in business. Improving your writing, math, reading and learning strategies will help you in securing and maintaining a job in your chosen field. The Academic Learning Center offers the following services.
The Writing Center offers one-on-one writing assistance open to all UNI undergraduate and graduate students. Writing Assistants offer strategies for getting started, citing and documenting, and editing your work. Visit the Online Writing Guide at www.uni.edu/unialc/writingcenter/ and schedule an appointment at 008 ITTC or 319-273-2361.
The Math Center offers individual and small-group tutorials especially helpful for students in Liberal Arts Core math courses. No appointment is necessary, but contact the Math Center at 008 ITTC or 319-273-2361 for the hours that tutors are available.
The Reading and Learning Center provides the Ask-a-Tutor program, consultations with the reading specialist, and free, four-week, non-credit courses in Speed Reading, Effective Study Strategies, PPST-Reading and GRE-Verbal. Visit http://www.uni.edu/unialc/ and 008 ITTC or call 319-273-2361.
In addition, the College of Business has a Rod Library reference librarian, who provides research help to students week days in the first floor lounge of the Curris Business building. If you are interested in assistance accessing business publications, check with the UNI Undergraduate Programs Office for the times and dates when the business reference librarian is available for consultation.
© Insurance Company Operations: Course Outline/Learning Assignments, A. Frank Thompson, August 22, 2017 All Rights Reserved.