The Role of RBC, Hurricane Exposure, Bond Portfolio Duration, and Macroeconomic and Industry-wide Factors in Property-Liability Insolvency Prediction
Jiang Cheng and
No 2011-WP-17, NFI Working Papers from Indiana State University, Scott College of Business, Networks Financial Institute
This research analyzes the performance of the Risk Based Capital (RBC) ratio and other variables in predicting insolvencies in the property-liability insurance industry during the period 1994 to 2008. This research contributes to the literature by analyzing a longer period of time than previous research, testing timely variables such as exposure to hurricane prone areas and testing the role of macroeconomic and industry-wide variables in property-liability insurer insolvencies. The results indicate that the accuracy of the RBC ratio in predicting insolvencies is inconsistent over time and that some previously tested financial ratios that are part of the Financial Analysis Solvency Tools system do not always reliably predict insurer insolvency. In addition, the insolvency propensity is found to be significantly related to an insurer’s hurricane prone area exposure, changes in interest rates, the industry-wide combined ratio, and the industry-wide Herfindahl index of premiums written.
Keywords: Risk-Based Capital Ratios; Insolvency; Hurricane Exposure; Duration; Macroeconomic Factors (search for similar items in EconPapers)
Pages: 44 pages
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://www.indstate.edu/business/sites/business.in ... P-17_Cheng_Weiss.pdf Full text (application/pdf)
Journal Article: The Role of RBC, Hurricane Exposure, Bond Portfolio Duration, and Macroeconomic and Industry-wide Factors in Property–Liability Insolvency Prediction (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:nfi:nfiwps:2011-wp-17
Access Statistics for this paper
More papers in NFI Working Papers from Indiana State University, Scott College of Business, Networks Financial Institute Contact information at EDIRC.
Bibliographic data for series maintained by Ray Thomas ().