Portfolio Issues of Mobilization Insurance: What Went Wrong, and Candidate New Offerings

Abstract

Financial hardships experienced by those in the military are well documented. Mobilization insurance has the potential to reduce the financial burdens of being called to active military duty. Reducing the financial burden of being called to active duty can provide numerous benefits to the military and Reservists including improved recruiting, lower attrition and reduced stress on activated Reservists. In this paper, the Ready Reserve Mobilization Income Insurance Program and the reasons for its failure are discussed. The portfolio characteristics of the stakeholders involved in the Reserve system are analyzed in an options pricing framework and a discussion of how a new mobilization insurance product might be structured is examined. While the concept of offering such insurance is simple enough, no known academic research has analyzed the financial positions of Reserve system stakeholders.

Keywords: Insurance, Portfolio Theory, Military

JEL Classification: G11, G20