The Informational Content of Default Risk in UK Insurance Firms

Mario Cerrato, Paolo Coccorese and Xuan Zhang

Working Papers from Business School - Economics, University of Glasgow

Abstract: “Historically, insurers have made money in two ways – returning an underwriting profit and investing premiums and making money on the investment returns.” By Nick Kitchen, Head of Technical Casualty and Motor Lines, Zurich Insurance plc. In this paper, we use a novel data-set of UK public and non-public insurance companies for the period 1985-2014 in order to investigate the empirical relationship between firms’ specific characteristics and default risk. We employ a portfolio approach, and after splitting firms’ returns into underwriting and investment returns, we find evidence that default risk is closely related to size and reinsurance activities, especially for small size firms, and that such firms are much less risky than large firms and earn the highest return when their default risk is low. Some policy implications are also provided.

JEL-codes: G20 G23 G28 (search for similar items in EconPapers)
Date: 2020-02
New Economics Papers: this item is included in nep-ias, nep-rmg and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.gla.ac.uk/media/Media_712397_smxx.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

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:gla:glaewp:2020_06

Access Statistics for this paper

More papers in Working Papers from Business School - Economics, University of Glasgow Contact information at EDIRC.
Bibliographic data for series maintained by Business School Research Team ().