Chapter 3 – Review of Literature

3.1 Introduction

What is a literature review?

A literature review is a survey of scholarly sources (such as books, journal articles,

and theses) related to a specific topic or research question.

It is often written as part of a thesis, dissertation, or research paper, in order to situate

your work in relation to existing knowledge.

In layman’s term it is review of existing literature.

3.2 Literature Review

1. Bhavya Bansal 1, Aishvarya Bansal 2 International Journal of Scientific and
Research Publications, Volume 4, Issue 10, October 2014

“Better governance leads to better management”. This paper is useful for increasing
the knowledge and awareness of how critical and crucial corporate governance is,
especially after the financial crisis that led to a recession in the worldwide economy.
This paper is an insight for corporate governance and risk management strategies
adopted in different insurance industries across the globe. Because corporate
Governance is not only mandatory but also recommended so that companies adhere to
best practices. It will correlate the theories formulated for corporate governance and
actual practices followed in insurance companies. It is helpful in carrying out the
existing literature on this topic along with the results derived from these studies.
Finally, it will conclude with recommendations and suggestions based on existing
studies.

There is investigation done regarding corporate governance norms followed in

insurance companies and its scope of improvement. During the last 25 years India’s
Insurance industry witnessed significant consolidation and a strengthened regulatory
framework with the establishment of the IRDA as its regulator.

“In fact, risk management through insurance is as much an art as a science.”

 2. P.K. Gupta, Insurance and risk management, Himalaya books, 2016

The device of insurance has become more popular now a days due to the increasing
dynamism of risk and the growth of professional risk management. The demand for
insurance too has increased tremendously with more demand for the different types of
products.

Also, the liberalization of markets especially in developing countries has increased the
need for risk products. Also, the recent government policy initiatives like crop
insurance, financial guarantee schemes for unemployed, various social security
programmes and raising limits of FDI (Foreign direct investment) in insurance has
resulted into a sudden shoot in the demand of insurance professionals. More and more
academic institutions all over the countries are offering highly specialized insurance
programmes to cater to this demand. Recently, the universities in India and abroad
both have introduced insurance as a specialized study both at graduate and
postgraduate level. This has increased the urgency of demand for the literature on
insurance in the Indian context. As per the expectations of the author this book proves
to be useful to the students and as well as the trainers.

3. Eling, Pankoke, 2016

This article reviews the current research on systemic risk in the insurance sector and
outlines new areas of research in this field. It has summarized and classified 48
theoretical and empirical research papers from both academia and practitioner
organizations. The survey reveals that traditional insurance activity in the life, nonlife,
and reinsurance sectors neither contributes to systemic risk nor increases insurers’
vulnerability to impairments of the financial system. However, non-traditional
activities (e.g., credit default, swap underwriting) might increase vulnerability and life
insurers might be more vulnerable than nonlife insurers due to higher leverage.
Whether non-traditional activities also contribute to systemic risk is not entirely clear;
however, the activities with the potential to contribute to systemic risk include
underwriting financial derivatives and providing financial guarantees. This article is
not only likely of interest and helpful to academics but also highly relevant for the
industry, regulators, and policymakers.
 4. Dietmar, Volume 6, Number 4, 2013

This study surveys the current affairs of operational risk management in insurance
companies with respect to strategies followed, processes implemented and
instruments used. Moreover, it provides insights into necessary risk managers' views
on current and future regulation of the risk management process. The findings
contribute to current discussions regarding the national implementation and
interpretation of the instructions by highlighting similarities and differences in dealing
with operational risk within the insurance sector. In particular, the results may be
useful to risk managers as a point of reference when evaluating the fairness of their
own company's risk management strategies, instruments and processes.

5. Skipper, 2007

This research article provides detailed understanding of risk management in insurance

at a global level. It provides an international perspective from the beginning, fulfilling
the need to address risk issues globally. Also provides knowledge regarding the
presence of risks in the insurance sector at the international level and how they
manage the risks.

6. J.D Cummins, Mary A Weiss, 2014

This article examines the potential of the insurance industry to cause systematic risk events that
occur in other segments of the economy. The primary indicators too are examined that determine
whether the institutions are risky systematically as well as do they contribute factors that worsen
the exposure to systematic events. The evaluation of systematic risk is based on a well-defined
analysis of the insurance industry, role in economy and the link between the insurers. The
conclusion is that the important activities do not have systematic risk. However, the
life insurers are vulnerable to reinsurance risk arising from credit exposure.

7. Shane Magee, Cornelia Schilling, Elizabeth Sheedy Journal of Risk and

Insurance 86 (2), 381-413, 2019

The article states the relationship between risk governance, risk, and performance
measures for a global sample of 107 insurance companies from 2004 to 2012. Our
risk governance index (RGI) covers several Solvency II provisions and includes the
existence of chief risk officer on the executive committee, risk committee
characteristics, and board industry experience. It is found that in the crisis period
2008–2009, firms with a higher RGI generally had lower expected default frequency.
These findings therefore support the role of risk governance as a business enabler.
Insurance companies typically upgrade their risk governance following a negative
shock, especially in countries that are well regulated and have weaker shareholder
rights.

8. Nadine Gatzert, Michael Martin Risk Management and Insurance Review 18

(1), 29-53, 2015

The development of an enterprise risk management (ERM) program enables

companies to manage corporate risks in a totally different manner as compared to the
silo‐based (independent) perspective in traditional risk management frameworks. One
main question in this regard is what factors drive the implementation of an ERM
system in companies and whether ERM programs can actually create value once
implemented. This article addresses these questions by conducting a comparative
assessment of empirical evidence from the literature regarding the determinants of
ERM and its value once implemented. In doing so we are able to illustrate differences
in model specifications and the underlying data

9. Kristina Dahlström, Jim Skea, Walter R Stahel The Geneva Papers on Risk
and Insurance-Issues and Practice 28 (3), 394-412, 2003

This article is about the interplay between three key concepts: the insurability of risk;
innovation and the broader framework of sustainable development. It is based on the
recent interest rate project which addressed the role the insurance sector and
insurance-based mechanisms might play in relation to innovation which promotes or
challenges, sustainable development. The project cast light on three issues:
opportunities for promoting sustainable development through innovation by adjusting
or sharing the responsibilities of private sector actors, regulators and policymakers;
promoting sustainable development innovation by using risk management
mechanisms from insurance in other specific areas or by the insurance sector using a
wider set of tools to manage novel risks and policy options for the complementary use
of insurance-related and other risk management systems.
 10. Evaluating the Role of Insurance in Managing Risk of Future Pandemics Howard
Kunreuther and Jason Schupp NBER Working Paper No. 28968 June 2021

The COVID-19 has demonstrated the challenges that policymakers, insurers, businesses, and
employees face when disaster assistance programs are developed after the pandemic has
already started. There is now an opportunity to design and implement effective and efficient
solutions to manage the financial risks of a future pandemic. This paper suggests a practical
framework informed by the recent experience with COVID-19 for defining a meaningful role
for insurance in managing business interruption and other risks from future pandemics.
Policymakers, regulators, businesses, and other stakeholders interacting with representatives
from the insurance industry can assist in defining its role in providing protection against the
financial consequences of future pandemics. This framework while designed for dealing with
future pandemics, may be applied to other unsuccessful and systemic risks.

11. Carolyn Kousky, Howard Kunreuther Risk Management and Insurance

Review 21 (1), 181-204, 2018

Insurance is an essential component of household and community resilience. It

protects insureds financially against disaster losses, can encourage investments in
cost‐effective mitigation measures through premium reductions, and facilitates the
rebuilding of property and long‐term recovery. Private insurers face challenges in
providing full protection against disasters. This has led governments around the
world to create a variety of public insurance entities, often designed as public‐
private partnerships. At a November 2016 workshop, “Improving Disaster
Financing: Evaluating Policy Interventions in Disaster Insurance Markets,”
participants evaluated disaster insurance programs for flood, earthquake, and
terrorism losses. This article synthesizes six papers and findings from the
workshop and suggests ways to improve public‐private partnerships for disaster
financing in three interrelated areas: (1) risk communication, (2) risk reduction,
and (3) risk transfer.