Determinants of insurers’ performance in risk pooling, risk management, and financial intermediation activities

Georges Dionne (), Robert Gagné () and Abdelhakim Nouira ()
Additional contact information
Robert Gagné: HEC Montreal, Department of Applied Economic
Abdelhakim Nouira: HEC Montreal, Canada Research Chair in Risk Management

No 07-4, Working Papers from HEC Montreal, Canada Research Chair in Risk Management

Abstract: Corporate finance theory predicts that firms’ characteristics affect agency costs and hence their efficiency. Cummins et al (2006) have proposed a cost function specification that measures separately insurer efficiency in handling risk pooling, risk management, and financial intermediation functions. We investigate the insurer characteristics that determine these efficiencies. Our empirical results show that mutuals outperform stock insurers in handling the three functions. Independent agents and high capitalization reduce the cost efficiency of risk pooling. Certain characteristics such as being a group of affiliated insurers, handling a higher volume of business in commercial lines, assuming more reinsurance, or investing a higher proportion of assets in bonds, do significantly increase insurers’ efficiency in risk management and financial intermediation.

Keywords: Risk pooling; risk management; financial intermediation; property-liability insurance; efficiency; agency costs (search for similar items in EconPapers)
JEL-codes: D21 D23 G22 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2007-04-30
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.risksresearch.com/_files/ugd/a6eed3_93 ... 956343db54955ab4.pdf Full text (application/pdf)

Related works:
Working Paper: Determinants of Insurers’ Performance in Risk Pooling, Risk Management, and Financial Intermediation Activities (2007)
Working Paper: Determinants of Insurers' Performance in Risk Pooling, Risk Management, and Financial Intermediation Activities (2007)
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:2007_004

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 ().