Analysing the Determinants of Credit Risk for General Insurance Firms in the UK

Guglielmo Maria Caporale, Mario Cerrato and Xuan Zhang

No 5971, CESifo Working Paper Series from CESifo

Abstract: This paper estimates a reduced-form model to assess the credit risk of General Insurance (GI) non-life firms in the UK. Compared to earlier studies, it uses a much larger sample including 30 years of data for 515 firms, and also considers a much wider set of possible determinants of credit risk. The empirical results suggest that macroeconomic and firm-specific factors both play important roles. Other key findings are the following: credit risk varies across firms depending on their business lines; there is default clustering in the GI industry; different reinsurance levels also affect the credit risk of insurance firms. The implications of these findings for regulators of GI firms under the coming Solvency II are discussed.

Keywords: insolvent; doubly stochastic; insurance; reinsurance (search for similar items in EconPapers)
JEL-codes: C58 G22 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Analysing the Determinants of Credit Risk for General Insurance Firms in the UK (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_5971

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