Stock Versus Mutual Ownership Structures: The Risk Implications

TLDR: In this paper, the authors provide empirical tests of the risk differences between two types of ownership structure in the property-liability insurance industry and provide empirical evidence that suggests stock insurers have more risk than mutuals where the risk inherent in future cash flows is proxied by the variance of the loss ratio.

Abstract: This article provides empirical tests of the risk differences between two types of ownership structure in the property-liability insurance industry. Empirical evidence is provided that suggests stock insurers have more risk than mutuals where the risk inherent in future cash flows is proxied by the variance of the loss ratio. Further evidence suggests that stock insurers write relatively more business than do mutuals in lines and states having higher risk. Copyright 1993 by University of Chicago Press.