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Annette L. Hofmann

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Great American Insurance Group Endowed Chair and Academic Director, Lindner Center for Insurance and Risk Management University of Cincinnati – Lindner College of Business

Annette L. Hofmann is the Great American Insurance Group Endowed Chair and Academic Director of the Lindner Center for Insurance and Risk Management at the University of Cincinnati’s Lindner College of Business. A recognized thought leader in insurance economics, behavioral risk management, and catastrophe risk financing, she also serves as Editor-in-Chief of Risk Management and Insurance Review and Deputy Editor-in-Chief of the Journal of Risk and Insurance. She has held endowed professorships at St. John’s University’s Greenberg School of Risk Management in New York and full professorships in Hamburg, Germany, where she designed the country’s first MBA and BBA programs in Risk Management. Her research explores behavioral and regulatory aspects of insurance decision-making, interdependent risks, and innovations in risk transfer, with publications in leading journals.

Bio from: Hybrid Event: Annette Hofmann - Regretful Risks: The Insurance Distortion Puzzle

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Why is there a general reluctance to buy insurance for low-probability-high-consequence risks and a preference for high-probability-low-consequence risk coverages? Using a regret-theoretical expected utility framework, we aim to shed light on such behavior. Regret theory posits not only that decision-makers experience regret following an ex-post “wrong” decision, but also that their anticipation of potential regret is integrated into their decision-making processes. Under regret, some risks are more regretful than others because the impact of regret aversion mainly kicks in at the extremes and so individuals will adjust optimal coverage accordingly. The often discussed failure of catastrophe insurance markets may be a consequence of this phenomenon.