Corporate Management of Highly Dynamic Risks: The Case of Terrorism Insurance in Germany

Thomann, Christian and Pascalau, Razvan and Schulenburg, J.-Matthias Graf von der and Gas, Bruno (2007): Corporate Management of Highly Dynamic Risks: The Case of Terrorism Insurance in Germany.

Abstract

This article extends the theory of corporate risk management to encompass highly dynamic risks. Taking Viscusi'�s (1989) prospective reference from the context of individual decision making and applying it to a corporate context we propose a theory of how corporations process new information. Using unique data on all terrorism insurance policies sold in Germany we find support for this concept of risk-updating by showing that the demand for terrorism insurance is strongly determined by the recent occurrence of terrorist attacks.

• Item Type: MPRA Paper
• Language: English
• Keywords: Corporate Insurance, Risk Management, Terrorism Insurance, Expected Utility, Prospect Theory
• Subjects: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search ; Learning ; Information and Knowledge ; Communication ; Belief ; Unawareness; G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill

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