Effect of inflation on insurers’ main financial indicators with panel data in the US P&C insurance industry

Georges Dionne () and Denise Desjardins
Additional contact information
Denise Desjardins: HEC Montreal, Canada Research Chair in Risk Management

No 25-07, Working Papers from HEC Montreal, Canada Research Chair in Risk Management

Abstract: Very few contributions have analyzed the effect of inflation on the US insurance industry. We evaluate the impact of inflation on reinsurance demand, liquidity creation, ROA and other financial ratios for P&C insurers, with panel data and with particular attention to differences across firm sizes. We use observed and forecasted measures of inflation during the period 1993-2023. We compute forecasted rates of inflation from the Bayesian Vector Autoregression (BVAR) model under two different assumptions, the Gaussian distribution and the Student-t distribution. We proceed with the Generalized Method of Moments (GMM) for econometric estimations. Overall, the findings indicate that insurers are responsive to forecasted inflation in the long run as well to realized inflation in the short run. Largest insurance companies adapted more quickly to inflation during the period of analysis.

Keywords: Inflation rate; P&C insurance industry; forecasted inflation; observed inflation; GMM estimation model; BVAR model; firm size (search for similar items in EconPapers)
JEL-codes: B22 E3 E4 G20 G22 G32 G38 G52 (search for similar items in EconPapers)
Pages: 105
Date: 2025-12-05
New Economics Papers: this item is included in nep-bec and nep-rmg
References: Add references at CitEc
Citations:

Downloads: (external link)
https://5e70bf08-4f49-4ce7-bda8-52b1e176ae16.files ... 885d98d8c51c8143.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:crcrmw:021827

Access Statistics for this paper

More papers in Working Papers from HEC Montreal, Canada Research Chair in Risk Management Contact information at EDIRC.
Bibliographic data for series maintained by Claire Boisvert ().