Insurer Opacity and Ownership Structure

Stanley R. Adamson, David L. Eckles and Stephen Haggard

Journal of Insurance Issues, 2014, vol. 37, issue 2, 93-134

Abstract: We examine the differences in opacity among insurers based on differencesin their ownership structures using “split” bond ratings as a proxy for opacity. Ouranalyses are consistent with mutual insurers being more opaque than stock insurers.These findings are consistent with the owners of mutual insurers being so dispersedand having managed the owner/manager conflict well enough that the opacity ofmutual insurer operations is less important to their owners. On the other hand, ownersof stock insurers demand relatively less opaque behavior on the part of managers. Thisfinding has important implications for investors, rating agencies, and regulatorscharged with evaluating the financial condition of insurers.

Date: 2014
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