Analysing the determinants of insolvency risk for general insurance firms in the UK

Guglielmo Maria Caporale, Mario Cerrato and Xuan Zhang

Journal of Banking & Finance, 2017, vol. 84, issue C, 107-122

Abstract: This paper estimates a reduced-form model to assess the insolvency risk of General Insurance (GI) firms in the UK. In comparison 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 insolvency risk. The empirical results suggest that macroeconomic and firm-specific factors both play important roles. Other key findings are the following: insolvency risk varies across firms depending on their business lines; there is default clustering in the GI industry; different reinsurance levels also affect the insolvency risk of insurance firms. The implications of these findings for regulators of GI firms under the newly launched Solvency II are discussed.

Keywords: Insolvency; Doubly stochastic poisson process; Insurance; Reinsurance (search for similar items in EconPapers)
JEL-codes: C58 G22 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:84:y:2017:i:c:p:107-122

DOI: 10.1016/j.jbankfin.2017.07.011

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