INSURANCE AND REAL ESTATE FINANCE
Learning outcomes of the course unit
In the first module, students are introduced to the complex of risks that characterizes the situation in which people and business operate on a daily basis, outlining the evolution of them, the main elements that distinguish them and the phases of risk management. After having dealt with the study of the risks, the analysis moves towards the different methods of management, focusing on insurance. In particular, the characteristics in terms of reverse cycle costs - revenues, technical-insurance and financial aspects, balance and articulation of the same, capital requirements, distribution channels are discussed. Each aspect is also dealt with specific reference to the regulations for the industry, deeply changed in last years. Finally, the risks covered by the main life and non-life insurance policies and the elements that most frequently can be found in the texts of policy are discussed.
The part of real estate finance introduces real estate italian market, distinguishing different vehicles of real estate investment (real estate funds, REITs, real estate companies) and comparing them critically, thanks to the intervention of experts, who will share their testimony. The real estate investment is described and analyzed in its main features, focusing on risk, yield and correlation between them, with reference to a single real estate investment or a portfolio of real estate assets. The financing of buildings is also described and compared in the different tools like mortgage and leasing, with all the tax effects. A special focus is dedicated to different real estate investment vehicles, especially considering the purposes of institutional traders who run them: asset management companies, social security institutions, etc.
At the end of the course, students will have acquired:
a. the knowledge needed to understand risks and real estate investment vehicles, the strengths and weaknesses of risk management and structured finance operations on real estate market, as well as the role and functions of the actors involved in the examined markets;
b. the ability to apply the acquired knowledge to critically analyze tools of risk management and real estate investment, the characteristics of the insurance and structured finance transactions in the world of real estate, in order to make decisions regarding management of risk and investment consciously and consistently with the needs of individuals at risk or investors;
c. the critical capacity (independent judgment) to evaluate independently issues related to risk management and to selection of the means to solve them, to the analysis and selection of real estate investment vehicles and corporate finance transactions related to them;
d. the ability to use a consistent appropriately technical language in communicating with the operators of insurance and financial markets, such as, for example, risk managers, technicians of the company, agents, brokers and asset management companies or operators of real estate funds , etc.
e. the ability to learn through the logical method of identifying problems and critical analysis of the solutions adopted.
Course contents summary
The course is divided into two modules:
- In the first module, the issues related to business risks are analyzed, considering the different alternatives available. Among these, particular attention is paid to insurance coverages and insurance brokerage and to the products and the management of insurance companies. The view is an economic and financial investigation, providing the necessary skills to be able to properly address the risk coverage, both for business and for retail customers.
- In the second part of the course, fundamental knowledge of economy of real estate market and of the techniques of analysis of structured finance transactions and outstanding related to the real estate sector is provided. The problems of evaluation of risk/return of investment and the actual cost of real estate financing are showed. Finally, real estate investment vehicles on the italian market and abroad are analyzed.
The course is divided into a structured discussion of the following aspects.
The first part speaks about:
1. Logics of risk analysis
2. Taxonomy of business risks in order to balance
3. Representation of the risks in the company financial statements
4. Risks from business interruption
5. The insurance process
6. Life and non-life insurance
7. The main non-life insurance policies
8. The main life insurance policies
11. The innovative and alternative channels
12. The insurance brokerage: the rules
13. The insurance brokerage: the italian situation
14. The insurance brokerage: the european situation
15. The settlement of claims
16. Pension funds and supplementary pension schemes
The second module speaks about:
17. The real estate market: trends and perspectives, the financiarization of the real estate sector
18. The risk of a real estate investment: measurement and management
19. The correlation between real estate investment and financing: mortgage, leasing, company vehicle
20. The italian real estate investment funds: tax and legal issues
21. The italian real estate investment funds: management issues
22. The prices of real estate funds: analysis of the determinants
23. The financial management of real estate funds
24. An economic-financial comparison between real estate investment vehicles
25. The private pension funds
26. Ethical investment
27. The real estate investments of institutional investors
Insurance module: "Economia delle imprese assicurative", C. Porzio, D. Previati, R. Cocozza, S. Miani, R. Pisani, McGraw-Hill, 2011 (capp. 1-8 e 11-13) and any supplementary materials reported by teachers.
Real Estate Finance module: “Real Estate: Manuale di economia e finanza immobiliare. III edizione”, C. Cacciamani (ed.), Egea, 2012 (capitoli 12, 14, 15, 16, 17, 18, 19, 20, 21, 23, 24, 25, 26) and any supplementary materials reported by teachers.
- Acquisition of knowledge: lectures;
- Acquisition of the ability to apply knowledge: evidence from experts in the sector;
- Acquisition of independent judgment: during the course, students will be encouraged to identify strengths and weaknesses of the various instruments of risk management and insurance business, of structured finance transactions in the field of real estate, real estate investment vehicles and operators involved in the market, making critical comparisons;
- Acquisition of learning skills: for each topic, the start is from the illustration of the problem to solve, analyzing critically the solutions adopted;
- Acquisition of technical language: during teaching, students will learn the meaning of terms commonly used in the sector, also using newspapers and trade press (Il Sole 24 Ore, Milan, Finance, etc..).
Assessment methods and criteria
Possibility of examination:
- written with oral supplementation (at student's request) for scores equal to or greater than 27/30;
- oral (by request of student) without the possibility of further integration.
The examination will take place through 8 open-ended questions (4 relating to the part of insurance and 4 relative to the part of real estate finance), accounted for up to 4 points each. For each question, the maximum score can be reached as follows:
- up to 2,5 points with reference to the establishment of knowledge;
- up to 0,5 points with reference to the ability to communicate through the use of appropriate technical language;
- up to 1 point with reference to the ability to learn, to apply the knowledge and independence of judgment.