Market Discipline in Property/Casualty Insurance: Evidence from Premium Growth Surrounding Changes in Financial Strength Ratings

Karen Epermanis and Scott E. Harrington

Journal of Money, Credit and Banking, 2006, vol. 38, issue 6, 1515-1544

Abstract: Analysis of abnormal premium growth surrounding changes in financial strength ratings for a large panel of property/casualty insurers generally indicates significant premium declines in the year of and the year following rating downgrades. Consistent with greater risk sensitivity of demand, premium declines were concentrated among commercial insurance, which has narrower guaranty fund protection than personal insurance. Premium declines were greater for firms with low pre-downgrade ratings, and especially pronounced for firms falling below an Arating. There is no evidence of moral hazard in the form of rapid commercial or personal lines premium growth following downgrades of A-or low-rated insurers.

Date: 2006
References: Add references at CitEc
Citations: View citations in EconPapers (58)

Downloads: (external link)
http://dx.doi.org/10.1353/mcb.2006.0081 full text (application/pdf)
Access to full text is restricted to subscribers.

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:mcb:jmoncb:v:38:y:2006:i:6:p:1515-1544

Access Statistics for this article

Journal of Money, Credit and Banking is currently edited by Robert deYoung, Paul Evans, Pok-Sang Lam and Kenneth D. West

More articles in Journal of Money, Credit and Banking from Blackwell Publishing
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and Christopher F. Baum ().