Analysing Insurer Rating Transitions with Different Economic and Industry Cycles

Yuling Wang ()
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Yuling Wang: School of Finance, Shanghai University of Finance and Economics, Guoding Road 777, Shanghai 200433, China.

The Geneva Papers on Risk and Insurance - Issues and Practice, 2010, vol. 35, issue 3, 435-451

Abstract: Changes in insurer ratings reflect changes in their financial strength. For the first time, unconditional and conditional matrices for U.S. property-liability insurer ratings during the period 1995-2006 are estimated and compared across different economic and industry cycles. Findings indicate that the distribution of insurer rating changes varies across different economic and industry cycles and insurers usually perform better when economic and industry conditions are favourable. Regression analyses generally confirm this relationship. Our results give a new perspective for regulators, consumers and investors to measure and manage insurer financial risks across time.

Date: 2010
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