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Insurance companies play a significant role in every economy; hence, it is essential to investigate and understand the factors that propel their profitability. Unlike previous studies that present a linear relationship, this study provides initial evidence by exploring the non-linear impacts of the determinants of profitability amongst life insurers in South Africa.

The study uses a panel dataset of 62 life insurers in South Africa, covering 2013–2019. The generalised method of moments and the dynamic panel threshold estimation technique were used to estimate the relationship.

The empirical results from the direct relationship reveal that investment income and solvency significantly predict life insurance companies' profitability. On the other hand, underwriting risk, reinsurance and size reduce profitability. Further, the dynamic panel threshold analysis confirms non-linearities in the relationships. The results show that insurance size, investment income and solvency promote profitability beyond a threshold level, implying a propelling effect on life insurers' profitability at higher levels. Below the threshold, these factors have an adverse effect. The study further points to underwriting risk, reinsurance and leverage having a reduced effect on life insurers' profitability when they fall above the threshold level.

The findings suggest that insurers interested in boosting their profit position must commit more resources to maintain their solvency and manage their assets and returns on investment. The study further recommends that effective control of underwriting risk is critical to the profitability of the life insurance industry.

The study contributes to the literature by providing first-time evidence on the determinants of life insurance companies' profitability by way of exploring threshold effects in South Africa.

This paper aims to study differences in risk behavior between holding companies that undertake both banking activity and insurance underwriting (labeled financial holding companies or FHCs) and stand-alone bank holding companies (BHCs).

The paper examines the discretionary accruals of FHCs to comparable BHCs and compares their bad loans-to-assets ratio in the future.

FHCs have lower discretionary accruals (loan loss provisions and realized capital gains) than BHCs. FHCs fare better than BHCs in terms of bad loans-to-assets ratio. Insurance underwriting has a dampening effect on discretionary accruals of FHCs.

This study raises additional research questions. Do shared governance and insurance underwriting serve as substitutes or complements? Will regulatory environment affect this relation?

When reported earnings do not match true earnings, the market participants lose the ability to price correctly, and the regulators lose the ability to effectively regulate banks. From the regulatory perspective, these findings suggest insurance underwriting by banks mitigate potential market distortions.

This paper is the first to study the effect of underwriting insurance risk on earnings management behavior of BHCs and its link to risk governance.

The State of Delaware recently passed a new banking law that allows banks and bank affiliates chartered in Delaware to sell and underwrite insurance nationwide. The new laws provide two potential benefits to banks; (1) increased profits from selling insurance and (2) reduced interest rate risk exposure from underwriting insurance. We find support for increased profit potential to banks from the law, but we fail to find a reduction in the interest rate risk exposure of the banks.

This study aims to examine the hypothesis that the effect of insurer risks on profitability is conditional on regulation, using two main regulatory directives in the Ghanaian insurance market as a case study.

This study used the robust ordinary least square and random effect techniques in a panel data of 30 insurers from 2009 to 2015 to test the research hypothesis.

The results suggest that regulations on no credit premium and required capital have insignificant effects on profitability of insurers. On the contrary, this study documents evidence that both policies mitigate the effect of underwriting risk on profitability and suggests that regulations significantly mitigate the negative effect of underwriting risk to improve profitability.

The finding suggests that policymakers and regulators must continue to initiate, design and model regulations such that they help tame risk to improve the performance of insurers in Ghana.

This study provides first-time evidence on the role of regulations in controlling risks in a developing insurance market.

Purpose – This chapter examines whether the underwriting processes of takaful operators for health takaful products conform to shariah.

Methodology/approach – A qualitative research method has been used for this study. Data have been collected from primary sources through interviews and from secondary sources by examining relevant documentation. Interviews were conducted with underwriters from takaful operators A, B, C and D. Interviews were also conducted with the shariah executives of these takaful operators and with shariah experts from two institutions – University A and Research Institute B – for their opinions on the underwriting process. This selection of respondents from those responsible for the underwriting process and from experts in shariah has assisted us in locating data for our research, based on their experience and the practices in which they are involved.

Findings – The study found that the underwriting process used by takaful operators was in accordance with Islamic principles.

Research limitations/implications – The study is limited to four takaful operators in Malaysia who have received awards for best operators; this study focuses on health takaful products.

Originality/value – This study provides a view about the process of risk selection which determines the contribution rate and whether a risk will be acceptable or not to the company.

The paper sets out to use the loss ratio series of Switzerland, Germany, the USA and Japan, to test whether underwriting cycles still exist internationally and to identify possible structural changes.

Based on financial theory and insurance pricing theory, co‐integration analysis was performed to check possible causes of structural changes.

All four countries have breaks in different years. This result leads to the hypothesis that the factors affecting underwriting cycles are mainly country‐specific, such as economic environment and regulations, rather than global/international. Although the financial theory and the insurance pricing theory suggest that the loss ratio series should be co‐integrated with the interest rate series with co‐integrating coefficient −1, the empirical results do not support the theories.

More detailed analysis for the time series characteristics for countries other than the USA is presented to investigate the possible existence of underwriting cycles.

The purpose of this paper is to demonstrate how crop price insurance premium can be calculated using an option pricing model and how insurers can transfer underwriting risks in the futures market.

Based on data from spot and futures market in China, this paper develops an improved B-S model for the calculation of crop price insurance premium and tests the possibility of hedging underwriting risks by insurance firms in the futures market.

The authors find that spot price of crops in China can be estimated with agricultural commodity futures prices, and can be taken as the insured price for crop price insurance. The authors also find that improved B-S model yields better estimation of crop price insurance premium than traditional B-S model when spot price does not follow geometric Brownian motion. Finally, the authors find that hedging can be one good alternative for insurance firms to manage underwriting risks.

This paper develops an improved B-S model that is data-driven in nature. Insured price of the crop price insurance, or the exercise price used in the B-S model, is estimated from a co-integration model built on spot and futures market price series. Meanwhile, distributional patterns of spot price series, one important factor determining the applicability of B-S model, is factored into the improved B-S model so that the latter is more robust and friendly to data with varied distributions. This paper also verifies the possibility of hedging of underwriting risks by insurance firms in the futures market.

This article aims to examine the existence of an underwriting cycle in property‐liability insurance for France, Germany and Switzerland (primary markets) and for the European reinsurance industry. It is also aimed to test how the two markets are related with each other in each country and how they influence each other.

Loss ratio data for France, Germany and Switzerland are used for the recent period 1982‐2001 in connection with the price of reinsurance in Europe as well as the money market rate. To test for the existence of cycles and calculate their length auto‐regressive processes of second order are applied.

There are cross‐country differences for the primary markets of the three countries. The reinsurance price index is highly cyclical with a calculated cycle length of almost nine years. It is shown that the reinsurance price index has a strong influence on the primary market loss ratios of the three countries studied.

With the exception of two studies examining the impact of reinsurance on insurance prices and profits, there has been no research as yet to determine the role of reinsurance on the cyclical behavior of underwriting results. This gap is filled here by an empirical study on three European countries.

This paper aims to consider a contribution model of a general Islamic insurance industry which allowed the return of underwriting profit to the Islamic insurance participants. The objective is to create a justified and equitable means of computing contribution which maximises the expected ownership right of the Islamic insurance fund.

The accumulation of funds and claims paid were characterised in form of accumulation and decay function over a period of time. It provides necessary and sufficient conditions for their existence and uniqueness. Mathematical derivative procedures were adopted to derive the underwriting returns to be returned to the Islamic insurance participants. Lastly, this paper recommends the incorporation of underwriting returns’ variable into the traditional actuarial model and provides theoretical justification for the process.

Then, the derivation of underwriting returns through convolution of accumulated funds and claims paid views in the form of Laplace Transform led to a conjecture and proved. Thereafter, the proposed and adjusted model was arrived at.

This study, to the best knowledge of the researcher, is the first attempt in the quantification of Islamic insurance industry. Thus, the model is the first attempt of creating a justified way of calculating the Islamic insurance participants’ contributions.

This study is an exploratory study investigating firm-specific internal factors that influence the profitability performance of selected life insurance firms in eight Asian countries (China, Hong Kong, Taiwan, Singapore, Japan, South Korea, Thailand and Malaysia) from 2008-2014. This paper aims to focus on internal rather than external factors based on the resource-based view suggesting that the internal resources of a firm are key to gaining competitive advantage.

The authors used panel data estimation model to test our six hypotheses on these eight selected countries for the period between 2008 and 2014.

A random effect model reveals that size, volume of capital and underwriting risk are significantly related to the profitability of Asian life insurance firm, measured as return on assets. Premium growth, asset tangibility and liquidity are insignificant predictors of the profitability performance of these life insurance firms.

Three implications of this study are that life insurance firms need to proactively tap new business opportunities by attracting younger generation customers via e-marketing technologies; secure larger capital base to finance their market expansion strategies; and focus on intangible resources such as goodwill, brand equity and reputation.

This study contributes to the literature by conducting an exploratory regional-based panel study of Asian life insurance firms to find common factors that contribute towards profitability. The study is conducted on a collective sample of Asian life insurance firms based on the premise that the firms included in the sample engage in cross-border activities and share the same international financial reporting standards. These commonalities allow us to treat the firms jointly in a somewhat similar Asian macroeconomic environment.