Journal ArticleDOI
The Impact of Firm Risk on Property-Liability Insurance Prices
TLDR
In this paper, the authors examined the impact of an insurer's level of insolvency risk on the prices the insurer obtains for its products in the property-liability insurance market.Abstract:
This article examines the impact of an insurer's level of insolvency risk on the prices the insurer obtains for its products in the property-liability insurance market. The measures of insolvency risk used are those implied by the option pricing model of insurance. The key finding is the existence of a negative relation between insolvency risk and insurance prices. This implies that property-liability insurers are penalized for default risk through lower prices, despite the existence of guaranty funds. Other firm-specific determinants of insurance prices are also identified. The results have significant implications for insurance researchers and regulators.read more
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Journal ArticleDOI
Solvency, Capital Allocation, and Fair Rate of Return in Insurance
TL;DR: In this paper, a method to allocate capital in insurance to lines of business is developed based on an economic definition of solvency and the market value of the insurer balance sheet.
Journal ArticleDOI
Internal Versus External Capital Markets in the Insurance Industry: The Role of Reinsurance
TL;DR: In this article, the authors compare internal and external sources of capital in the insurance industry by analyzing reinsurance activity between affiliated and unaffiliated insurers, and find that while demands for internal or external reinsurance have some factors in common, there are cost-based differences in internal and externally capital, as well as structural differences in the use of internal orexternal reinsurance.
Journal ArticleDOI
Minimizing effects of ‘liability of foreignness’: Response strategies of foreign firms in the United States
TL;DR: The authors found that foreign firms on the average underperform compared to domestic firms in the U.S. and that these firms take a differing strategic posture to cope with the disadvantages of being a foreign firm compared with domestic rivals.
Journal ArticleDOI
Estimating the Cost of Equity Capital for Property-Liability Insurers
TL;DR: In this paper, the authors presented new evidence on the cost of equity capital by line of insurance for the property-liability insurance industry and used the full-information industry beta (FIB) methodology to decompose the cost by line.
Journal ArticleDOI
Capital-based regulation, portfolio risk and capital determination: Empirical evidence from the US property–liability insurers
TL;DR: In this paper, the impact of capital-based regulation on the insurer's risk and capital adjustments in the US property-liability insurance industry is examined and the results indicate that insurers appear to rely heavily on retained earnings to make up their capital shortage and insurers with greater growth opportunity may hold high levels of capital to control for agency problems.
References
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Journal ArticleDOI
Elements of Econometrics.
Ian Domowitz,Jan Kmenta +1 more
TL;DR: The Elements of Econometrics as mentioned in this paper is a textbook for upper-level undergraduate and master's degree courses and may usefully serve as a supplement for traditional Ph.D. courses in economics.
Book
Elements of econometrics
TL;DR: The emphasis is on simplification whenever possible, assuming the readers know college algebra and basic calculus, and Jan Kmenta explains all methods within the simplest framework, and generalizations are presented as logical extensions of simple cases.
Journal ArticleDOI
Contractual Provisions, Organizational Structure, and Conflict Control in Insurance Markets
David Mayers,Clifford W. Smith +1 more
TL;DR: In this article, the authors provide a foundation for a positive theory of insurance contracting with examples of its testable predictions and argue that incentive conflicts arise when discretionary action is authorized and that contractual provisions and organizational structures control sources of conflict within the insurance market.
Journal ArticleDOI
Price, Financial Quality, and Capital Flows in Insurance Markets
TL;DR: In this article, the authors developed a model of price determination in insurance markets, which predicts that the price of insurance, measured by the ratio of premiums to discounted losses, is inversely related to insurer default risk.
Journal ArticleDOI
Stock Versus Mutual Ownership Structures: The Risk Implications
TL;DR: 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.
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Price, Financial Quality, and Capital Flows in Insurance Markets
Stock Versus Mutual Ownership Structures: The Risk Implications
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David Mayers,Clifford W. Smith +1 more