Jyh-Horng Lin

The transition of thermal power systems toward lower-carbon electricity raises a critical strategic question: whether to rely on cross-border electricity imports or reactivate domestic nuclear capacity under supply constraints. This study examines the trade-offs between these alternatives within a sustainable finance framework. A contingent-claim model is developed in which a life insurer provides long-term financing to a biomass-energy supplier, a thermal power plant, and a nuclear power plant operating under carbon-pricing regulation. The framework links electricity-market decisions with financial risk valuation, allowing the joint effects of biomass utilization, carbon regulation, electricity imports, and nuclear-security risks to be evaluated. The results show that biomass integration and tighter carbon regulation reduce short-term profitability in thermal generation but support long-run decarbonization. Cross-border electricity imports improve system flexibility and reduce operational volatility, strengthening the financial position of thermal producers. In contrast, nuclear-security disruptions significantly increase default risk for nuclear assets, reflecting their exposure to operational and regulatory uncertainty. By integrating energy-transition strategies with contingent-claim valuation, the analysis highlights the role of financial intermediation in shaping investment incentives and risk allocation in the electricity sector. The findings suggest that coordinated policies combining market integration, low-carbon transition strategies, and stable financing mechanisms can enhance system resilience.

This paper presents a contingent claim model designed to assess an insurer’s equity within the framework of carbon trading regulations imposed on borrowing firms while also considering the integration of green lending. The development of this model is particularly relevant for regions with established carbon trading markets, with a specific focus on the post-period following the 2015 Paris Agreement concerning climate change. We focus on shareholders and policyholders to optimize equity and ensure maximum protection. Strict caps in cap-and-trade harm interest margins, reducing guaranteed rates for equity maximization and compromising policyholder protection. Government intervention through sustainable production carbon trading hinders win-win outcomes. Green subsidies can improve insurer margins, but achieving win-win solutions remains challenging. A collective approach is needed to share sustainable production and finance benefits among diverse economic sectors.

Determining the optimal guaranteed rate of life insurance policies can effectively promote sustainable societies and disaster-resilient communities in times of war. Nevertheless, such strategic coverage remains uncommon in many countries. This article presents a capped-down-and-out call option model to assess life insurers’ safety during conflicts. Wars may lead to reduced life insurance businesses due to lower guaranteed rates set by insurers, yet they can also improve insurer safety within an imperfectly competitive insurance market. By increasing the surrender rate of the policy associated with reducing the optimal guarantee rate, the insurer’s security is improved, thereby contributing to the stability of the overall insurance. Our findings suggest setting guaranteed rates is critical to asset-liability matching management, especially in wartime, to maintain insurance stability.