Yehuda Kahane

Yehuda Kahane (born August 4, 1944) is the 2011 recipient of the John S. Bickley Founder's Award for his contribution to the theory, practice, and education of insurance and risk management. Kahane is active in both the academic and business areas.

Yehuda Kahane
Born (1944-08-04) August 4, 1944
CitizenshipIsrael
Alma materHebrew University of Jerusalem
Scientific career
FieldsInsurance and finance
InstitutionsFaculty of Management, Tel-Aviv University
Akirov Institute for Business and Environment

He is a professor of insurance and finance, Faculty of Management, and Head of the Akirov Institute for Business and the Environment, Tel-Aviv University. He founded and served as dean of the first academic school of insurance in Israel (now a part of Netanya Academic College). At Tel Aviv University he directed the Erhard Insurance Center, the actuarial studies program, and coordinated the Executives Development Programs. He is a life and non-life actuary.

Since 1966, Kahane has taught at universities around the world, including the Wharton School of the University of Pennsylvania, the University of Texas at Austin, the Hebrew University of Jerusalem, the University of Florida, and the University of Toronto. He founded and directed the Israel CLU Program. He has organized and lectured in hundreds of seminars and conferences.

Kahane, the author of several books and numerous articles, was ranked among the most prolific researchers in insurance (JRI, June 1990). Risk Management for Enterprises and Individuals, 2009 (coauthored with E. Baranoff and P. Brockett, Flat World Knowledge) is becoming the leading textbook in the area.

His studies in risk management, and his practical business experience, led him to realize the importance and urgency of environmental risks issues. In the late 1960s, H. Levy and Kahane were among the pioneers who applied multiple regressions for insurance rate-making. In the early 1970s, he developed the concept of balancing assets and liabilities of financial intermediaries, in works that are still quoted 35 years later. These studies laid the foundations of theories of insurance rate making, solvency, insurance regulation, and to the vast area which is now known as ERM – Enterprise Risk Management. He has made major contributions to the theory and practice of loss reserving, agriculture and crop insurance, and the use of data mining in insurance.

In 1982, he consulted a project to increase food production in Latin American countries. The pivot to the plan was developing the then practically non-existent agricultural reinsurance plans, that enabled to supply insurance protection for the farmers' crops. The coverage was then used to guarantee the financing that was needed for acquiring better agricultural technologies. This helped to increase the agricultural reinsurance market from about $15 million to multiple billions, and at the same time to drastically increase the agricultural output of the entire continent, to better feed hundreds of millions people.

Kahane is a co-founder, director, and major shareholder in Ituran Location and Control (NASDAQ:ITRN). He was a co-initiator of the concept of "new" balanced pension funds in Israel, and was the co-founder and co-owner of the managing firm of the first fund (Teshura), that became the fourth largest fund in Israel. He is involved in the formation and management of start-up companies in a variety of advanced and high-tech areas, specializing in seed money investments. He owns the Weizman Hi-Tech Incubator, and is a co-owner of Capital Point Ltd. (traded on TASE) which owns Ofakim and Katzrin technological incubators. In addition he is involved in many voluntary NGOs activities (e.g., Chairman of the Association of Visually Impaired People in Sharon District, the PIBF - Palestinian International Business Forum, etc.).

He started his business career in a large multinational corporation, and in the management of various businesses. In addition he served as a consultant on risk management, insurance and actuarial and financial topics to the government, large organizations, and major companies both in Israel and internationally. Kahane has served on the Israeli Insurance Council and on several government committees on a variety of insurance topics.

Kahane earned a bachelor's degree in economics and statistics in 1965, a master's degree in business administration, cum laude, in 1967, and a PhD in finance in 1973, all from the Hebrew University of Jerusalem. He has served as an associate editor of the leading journals on risk and insurance. He has taught courses in technological forecasting (the first teacher of this subject in Israel), finance, insurance, risk management, and actuarial topics. His research focus is on the portfolio implications for insurance, rate-making, automobile insurance, natural hazards, pension and life insurance, reserving, and environmental risks.

Summary

Kahane is an influential figure in the insurance industry and in the actuarial profession, as seminal thinker, a prominent insurance educator and researcher, an entrepreneur (in both academic, insurance, and technological areas) and as advisor to companies. He is an internationally renowned pioneer of new concepts and ideas (e.g., in the area of balancing asset and liability portfolio, new rate making and reserving techniques, insurance under inflationary circumstances, insurance of natural risks in agriculture, etc. ). He was involved in the foundation of actuarial groups in Israel, Portugal, and in the former Soviet Union countries, and he has a unique impact on the insurance industry in Israel – through the establishment of new insurance schools, and through the involvement in almost any important insurance issue for more than four decades. He is also a celebrated author and speaker who challenged the industry to implement innovations, and has been ranked among the most prolific researchers in insurance.

Accomplishments

Kahane is an active entrepreneur in both the academic and business worlds. His activities have had a substantial impact on the insurance industry, especially in Israel.

His main contributions lie in the following areas:

  • Pension Plans in Israel. He was involved in reforming the capital markets in Israel, which had a great impact on pension funds and providence funds. He was among the first to draw attention to the accumulating actuarial deficits of the pension funds, and to show ways to solve the problem. Following that, he was among the initiators of new non-union pension schemes for large segments of the population (e.g., for the members of the kibbutz movements). This led to the establishment of the new concept of “balanced pension funds.” Kahane was a co-founder and owner of the first managed balanced pension fund (“Teshura”) at the end of the 1980s (this fund became the fourth largest fund in Israel in 1995). The idea had been copied by other newly formed funds, and was adopted by the Commissioner of Insurance as the leading model for the post-1995 pension reform in Israel.
  • Location and Prevention of Car Theft. He co-founded Ituran Location and Control, a firm that uses cellular communication technology to track any object (e.g., car) or person. Its products are used to prevent car theft and hijacking, and to locate people suffering from Alzheimer’s disease. The firm was established in 1995, and is now traded on the major list of Tel Aviv Stock Exchange, and on Nasdaq (ITRN). The system is used in Argentina, Brazil, Florida, and Israel, where it has been a major factor in fighting auto theft.
  • No Fault Automobile Insurance. A driving force in the introduction of a pure no-fault automobile insurance system (for bodily injuries only) in Israel (1976), Kahane conducted the first feasibility study and the setting of the initial rate structure for this line of business, and provided counsel to a parliamentary committee that was studying the topic. Later, he was in charge of determining the loss reserves for this line by employing modern and sophisticated actuarial techniques that have been the key for setting no-fault automobile insurance rates in Israel for three decades.
  • Natural Risks in Agriculture. He served as a consultant in a large project to increase food production in Latin America in the 1980s (in IICA Costa Rica, financed by the US AID). Part of the project involved insurance that enabled farmers to obtain financing for improved agricultural technologies. A key issue was to set up national agriculture insurance companies in most Latin American States, and to obtain reinsurance (at the undeveloped agriculture reinsurance market in those days). Besides its impact on food production, this led later to the development and growth of the world agriculture insurance and reinsurance markets. Through his activities at the PIBF (Palestinian International Business Forum) Kahane initiated the adoption of a similar approach for the Palestinian Authority, and this project is now in its implementation stages. He had a substantial impact on the setting of rates and terms of the insurance coverage for IFNRA (the Israeli Fund for Insurance of Nature Risks in Agriculture – now named “KANAT”) - for the entire agricultural sector in Israel - as a director for 10 years, and as a consulting actuary since then.
  • His studies on portfolio approach for the balancing of assets and liabilities of financial intermediaries, set the foundations for the concept of ERM (Enterprise Risk Management).
  • Shaping the Israel Social Security System. Kahane twice served as the chairman of strategic committees for the National Insurance Institute (Israel's social security), which determined the financing of the social security system.
  • Membership in National Committees.
  • Israel Insurance Council (a statutory appointment)
  • National committee on earthquake risks
  • National pension policy committee (Shtessell Committee)
  • Research and database committee for the prevention of traffic accidents.
  • Committee on the status of the Israeli Social Security System (Brodet Committee)

Insurance Education

Kahane is recognized as a leader of insurance education worldwide. Some have called him “the Israeli Huebner” for activities such as the following:

  • Established the Israel Academic School of Insurance (1995) with the Israeli Association of Insurance Companies, and served as its first dean. This is the only accredited insurance BA program in Israel. The school is now a part of Netanya Academic College and has hundreds of graduates.
  • Participated in forming the actuarial group in:
    • Portugal: conducted the first two actuarial programs for the Association of Portuguese Insurers.
    • Former Soviet Union countries: taught in the Actuarial Summer School at the University of Warsaw.
  • One of the founders of the CLU (Israel) program in 1984, and director of the program for twenty years. Created under a license from the American College (USA) and set up as a joint venture of the Insurance Agents' Association of Israel and the College of Insurance (a branch of the Association of Insurance Companies).
  • Participated in the first programs on Social Security, health insurance, and insurance portfolio management at Ljubljana University in Slovenia, immediately after Slovenia became independent.
  • Taught at the Hebrew University of Jerusalem (1966–73, 1975–77), Ben-Gurion University of the Negev (1970-2), the University of Florida (1973-4), The University of Toronto (1974-5), IESA in Caracas, Venezuela (1979, 1981), The Wharton School, University of Pennsylvania (1981-2), and the University of Texas at Austin - where he served as the visiting Blades Professor of Risk Management and Insurance. He has also presented courses in other schools outside Israel.
  • For many years has chaired the only Risk and Insurance Department in Israel, at Tel Aviv University, and directed the Erhard Insurance Center. The Graduate School of Business of Tel Aviv University was ranked for years among the top business schools outside the USA. The Insurance Department has been ranked among the top ten in the world, according to several publications (Journal of Risk and Insurance, June 1990), despite its small faculty.
  • He directed the actuarial program at Tel Aviv University 1977-79. Approximately a third of the actuaries in Israel were his students.
  • For more than three decades he has organized many seminars (typically 3-10 every year), on a variety of specific insurance topics, often with guest speakers from abroad.
  • He has presented hundreds of lectures in a large variety of forums: universities, government organizations, trade unions, insurance and non-insurance firms, pension funds, banks, etc. He presented invited lectures in many countries besides Israel (excluding international scientific conferences), including Canada, Japan, Portugal, Slovenia, Switzerland, Thailand, Turkey, Venezuela, United Kingdom, and the USA.
  • Served as a moderator in some International Insurance Society meetings since 1979, and presented papers at the IIS Research Round table.
  • The recent textbook Risk Management for Enterprises and Individuals (co-authored with E. Baranoff, P. Brockett) is the first risk management textbook that can be read freely on the internet (published in 2009 by FlatWorldKnowledge.com NY, NY), http://www.flatworldknowledge.com/printed-book/1635

Leading Researcher in Insurance

Kahane’s contribution in research and the theory of insurance since the early 1970s has mainly been on the borderline between finance and actuarial studies. Following are his major areas of contribution. References to articles described below are found in his vitae at: http://recanati.tau.ac.il/~kahane

Financial and Portfolio Models in Insurance

Kahane has been among the developers of the concept of balance sheet immunization in non-life insurance. (See, for example, B-5, B-9, B-10, B-16, B-17, B-21, B-30, B-35, B-36, B-41, B-45, B-52, B-55, B-57, B-61, B-62, and D-1 Reference numbers to the resume in the web site). Due to the correlation between the performance of investment activities and the underwriting results, the investment and underwriting activities (portfolios) have to be managed simultaneously. The portfolio models developed by him have many implications for the managements of insurance company, the selection of the optimal product mix, ratemaking and solvency. A paper written jointly with Dave Nye on this topic (JRI 1975), received an award for being an article that withstood the test (and teeth) of time. Some of these articles are still quoted after 25–30 years. Other papers in this group deal with sophisticated theoretical financial problems: optimization of life insurance company operation, competitive and complementary relationships between insurance policies and financial instruments (which explain the strong competition expected between insurance and banking industries), optimal consumption investment and insurance decisions, etc.

Investment income in insurance ratemaking

The development of the concept and theoretical formulae which show how investment return and risk should affect insurance rates (B-12, B-14, B-24, D-13). One of the immediate implication of insurers’ assets and liabilities portfolio management is in the area of ratemaking. The insurers practically “borrow” money from the insureds. If the insurance transaction was risk-less, the loading should have been negative and equal to the risk-free interest rate. However, since the transaction is risky, the loading formula has to be adjusted to the risks. Kahane has been writing and presenting papers on this topic since 1975. The first became the focus of ASTIN (the international actuarial association in general insurance) 1978 meetings in Taormina, Sicily. A later joint paper with Biger (Risk Considerations in Insurance Ratemaking, JRI 1979) received ten years later the award for a paper that withstood the test of time, and is still quoted until today.

Ratemaking in general insurance

Perhaps the first application of multiple regression techniques for rate making. Determination of the automobile insurance rates for all companies in Israel (with H. Levy, 1969). An English summary was published only several years later (JRI March 1975). However, partial translations were brought to the attention of leading world re-insurers much earlier, and affected their methods (e.g., B-4 in the list). He developed rate making in other lines of business e.g., natural risks in agriculture insurance (B-53). More recently he was involved in insurance data mining for rate making purposes (B- XX).

Theoretical microeconomic insurance problems

Optimal insurance consumption (B-57), consumption and insurance decisions (B-62), new theoretical developments concerning risk taking behavior and attitude towards risk and return with Brockett (B-61) (this article was ranked amongst the best articles in Management Science).

Automobile insurance

Kahane has been among the driving forces behind the Israeli 1975 no fault reform. Many studies relate to automobile insurance (B-8, B-17, B-19, B-32, B-56, C-2, C-4, F-3, F-4, and F-5) and many studies focus on the no fault concept and its application.

Solvency regulation

Theoretical papers, demonstrating some problems in insurance regulation and especially the limitations of capital adequacy rules (e.g., B-13, B-22, B-28, D-2, D-8).

Inflation in Insurance

One of the areas in which Kahane has a special expertise. (B-6, B-11, B-23, B-34, B-37, B-40, B-46, B-48, B-49, C-5, C-6). Many articles dealing with various effects of inflation and exchange rate fluctuations on insurance companies and insurance contracts. Among these: how to optimize the operation of insurance company in inflation (balancing asset and liability portfolios, tax implications, etc.).

Natural hazards A study of earthquake risk in Israel, and implications for national policy (B-50)

Studies of natural risks in agriculture (B-53, D-12). Certain parts of these studies, which have commercial or strategic national values, have not been published.

Options in insurance

Some of the first applications of option theory in the area of insurance. (B-23, B-26, B-39, B-43, H-9). How to deal with exchange rate risks. Sophisticated option utilization in reinsurance.

Reinsurance

Theoretical studies of the structure of world insurance markets. Why do we have insureds, insurers and reinsurers, rather than a direct market with only insureds and insurers? (D-9, B-54).

Tax aspects of insurance

Taxation of bodily injury benefits (B-27). Taxation and optimal operation of insurance company in inflationary periods (B-37). Taxation and the Social Security system (H-22), etc.

Health insurance (C-8)

A report (testimony) on the recommended health insurance system. This study was used by a national committee on health insurance in Israel, which adopted the recommended approach, and led to the enactment of a National Health Insurance Law in 1995.

Historical aspects of insurance

(B-29, D-4, D-6). Old forms of insurance. Existence of ancient insurance arrangements. Studies of ancient documents. These studies show the origins of insurance in the ancient world, and relates to the origins of modern insurance in the Iberian Peninsula.

Pension programs

(B-1, B-33, B-44, B-47, and D-7). Their actuarial balance. Biases and general problems. Pensions and National savings.

Risk management problems Discussion of optimal risk management (B-45)

The handling of the risks of large computer centers. Theoretical and practical problems with pools of computer centers (D-10, B-51, B-59).

Insurance and the capital market

Kahane has published many articles on financial reporting, the role of insurance and pension funds in the capital market, the need for reforms in the market, etc. (B-3, B-7, B-15, B-20, B-31, B-37, B-42, C-1, C-7, D-3, D-5, F-1, F-2, and F-6).

Mutual Insurance

Discussion of sophisticated problems of mutual insurance. The trade-off between capital, the number of participants in the mutual arrangement, and the risk level.

Environmental risks

Recognizing the importance and urgency of the environmental and sustainability issue Kahane devotes much time to these issues, He heads the Akirov Institute for Business and the Environment. Due to the need to bring in immediate changes in the business sector, he now publishes in media which are more accessible to the public, and lectures in business executive conferences and seminars.

Impact of Accomplishments

The contributions that involved institutions or governments were carried out with the cooperation of others. Most research projects were carried out independently.

  • Introduced new actuarial concepts (for ratemaking, reserving, regulation, etc.), which are used in practice.
  • Founded new organizations: insurance educational programs, insurance and insurance related businesses, as explained above.
  • Had a major impact on Israel’s no fault motor car insurance
  • Devotes much time for voluntary activities and service to the public:
  • Member of many organizations in the past and present: e.g., president of the Hebrew University Student’s Council, and member of the Student’s Organization's government, the management of the H. University teachers' Association, University committees, Tel Aviv University Board of Governors and the University Senate, etc.
  • Among the founders of the Assoc. for Delaying Age Related Processes
  • Fighting against traffic accidents, partially through Or Yarok (= “Green Light”). This is a voluntary organization that had been founded by parents who lost their children in traffic accidents. The organization has very significant impact in Israel.
  • The Association for the Visually Impaired People (Chairman of Sharon District, and Chairman of Finance Committee of the national umbrella organization).
  • Kahane likes to affect our environment, by helping the development of new materials and processes, with a special attention to environmental friendly inventions. Many of the firms he co-founded are environmentally “green”.

Recognition
  • The 2011 recipient of the highest and prestigious award in the insurance world (The John S. Bickley Founder's award - a gold medal for excellence) for pioneering and lasting contribution to the theory, practice and education in insurance.
  • Honored by the Consumers Council for good service(1980?)
  • Honorary member of Israel Brazil Chamber of Commerce (2008)
  • Two awards for research work that withstood the test of time:
    • “Development of the portfolio model balancing the assets and liabilities of insurers” (Journal of Risk & Insurance, 1975, with D. Nye)
    • “Risk Considerations in Insurance Ratemaking” (JRI, 1979 with N. Biger)

Professional and Personal

Kahane is Professor, Finance and Insurance, Faculty of Management, Head of the Akirov Institute for Business and the Environment, Tel Aviv University. A life and non-life actuary, and academic and business entrepreneur.

Personal life

Yehuda Kahane was born in 1944 in Jerusalem, Israel (Palestine at that time), His childhood passed in Talpiot, a southern neighborhood of Jerusalem (some 3 km from Beth-Lehem), His parents emigrated from Czechoslovakia to Palestine in the late 1920s. His father Joshua Osias Kahane (who earned a doctorate from the University of Brno, now in the Czech Republic) was one of the first veterinarians in Israel. During the 1948 war they were evacuated to another part of (the then besieged) Jerusalem and returned to their home only when the war was over. He attended the Beth Hakerem High School (a special school connected with the Hebrew University of Jerusalem) and specialized in mathematics-physics. After graduation he continued his studies at the Hebrew University of Jerusalem, and earned three degrees there: a BA in Economics and Statistics 1965, an MA in Business Administration cum Laude in 1966 (he was the first MA of the school; until that time the Hebrew university conducted only diploma studies), and a Ph.D. in finance 1973.

He names Professor Marshall Sarnat, Tsvi Ophir, Louis Guttman, and Myron (Mike) Gordon among his important academic influences. Kahane's wife Rivka was born in Russia at the end of WWII (Her parents escaped to Russia from Poland). She immigrated to Israel in 1950. She is a graduate of the Hebrew University of Jerusalem (Sociology and literature) and is also a certified nurse. She was the Head Nurse of the Hematology Department at Rabin Medical Center (Beilinson) in Petach Tikva until her retirement.

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