Search citation statements
Paper Sections
Citation Types
Year Published
Publication Types
Relationship
Authors
Journals
This paper develops a capped barrier option model to examine how a cap-and-trade mechanism affects an insurer’s guaranteed rate-setting behavior and policyholder protection in a financial gray rhino environment. Toward sustainability, the insurer explicitly captures the credit risk from the borrowing firms, participating in the cap-and-trade scheme to reduce carbon emissions, an essential issue of carbon emission and environmental protection when facing gray rhino threats. In addition, the energy economics and policy analysis are from the fund-providing insurer’s perspective. Green lending policies and life insurance policy loans (i.e., disintermediation related to insurance stability) are crucial to managers and regulators, particularly bridging the borrowing-firm carbon transactions for carbon emission reductions toward sustainability. We show that the shrinking regulatory cap of the cap-and-trade scheme harms policyholder protection, adversely affecting insurance stability. The harm becomes more serious when the gray rhino threat on borrowing firms becomes significant. An increase in policy loans decreases the insurer’s interest margin and policyholder protection. However, increasing the gray rhino threat decreases life insurance policies at a reduced guaranteed rate but increases policyholder protection, contributing to insurance stability. Therefore, the government can use the cap-and-trade scheme to control carbon emissions and improve the environment, but it harms policyholder protection. We suggest that, for example, the government should subsidize the insurer for green lending, affecting insurance stability.
This paper develops a capped barrier option model to examine how a cap-and-trade mechanism affects an insurer’s guaranteed rate-setting behavior and policyholder protection in a financial gray rhino environment. Toward sustainability, the insurer explicitly captures the credit risk from the borrowing firms, participating in the cap-and-trade scheme to reduce carbon emissions, an essential issue of carbon emission and environmental protection when facing gray rhino threats. In addition, the energy economics and policy analysis are from the fund-providing insurer’s perspective. Green lending policies and life insurance policy loans (i.e., disintermediation related to insurance stability) are crucial to managers and regulators, particularly bridging the borrowing-firm carbon transactions for carbon emission reductions toward sustainability. We show that the shrinking regulatory cap of the cap-and-trade scheme harms policyholder protection, adversely affecting insurance stability. The harm becomes more serious when the gray rhino threat on borrowing firms becomes significant. An increase in policy loans decreases the insurer’s interest margin and policyholder protection. However, increasing the gray rhino threat decreases life insurance policies at a reduced guaranteed rate but increases policyholder protection, contributing to insurance stability. Therefore, the government can use the cap-and-trade scheme to control carbon emissions and improve the environment, but it harms policyholder protection. We suggest that, for example, the government should subsidize the insurer for green lending, affecting insurance stability.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.
hi@scite.ai
10624 S. Eastern Ave., Ste. A-614
Henderson, NV 89052, USA
Copyright © 2024 scite LLC. All rights reserved.
Made with 💙 for researchers
Part of the Research Solutions Family.