Identifying permanent and transitory risks in the Chinese property insurance market

Feng Guo and Ying Sophie Huang

The North American Journal of Economics and Finance, 2013, vol. 26, issue C, 689-704

Abstract: This paper develops a theoretical model to identify various risks in the Chinese property insurance market. Consequently, we apply a structural VAR model to quantify the magnitude, historical timing of these risks, and their dynamic impacts on the permanent and transitory components of the insurance premiums. The results indicate that the enormous amount of speculative funds flowing into China has aggravated insurance premiums as well as helped accelerate market volatilities due to its uncertain nature to the domestic economy and its short-term characteristic of investing. In particular, the speculative shock is shown to be the primary factor responsible for the transitory fluctuation of insurance premiums while the supply shock explains the preponderance of insurance premiums’ permanent growth in recent years.

Keywords: Property insurance; Speculative funds; Risks; China (search for similar items in EconPapers)
JEL-codes: C32 E44 G22 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:26:y:2013:i:c:p:689-704

DOI: 10.1016/j.najef.2012.09.001

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