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1 – 10 of over 1000
Article
Publication date: 20 August 2018

Manu Gupta and Puneet Prakash

This paper aims to study differences in risk behavior between holding companies that undertake both banking activity and insurance underwriting (labeled financial holding…

Abstract

Purpose

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).

Design/methodology/approach

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

Findings

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.

Research limitations/implications

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

Practical implications

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.

Originality/value

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.

Details

The Journal of Risk Finance, vol. 19 no. 4
Type: Research Article
ISSN: 1526-5943

Keywords

Article
Publication date: 1 February 1996

Craig R. Brown and Drew B. Winters

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…

Abstract

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.

Details

Studies in Economics and Finance, vol. 17 no. 1
Type: Research Article
ISSN: 1086-7376

Article
Publication date: 28 August 2019

Baah Aye Kusi, Abdul Latif Alhassan, Daniel Ofori-Sasu and Rockson Sai

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…

Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Practical implications

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.

Originality/value

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

Details

Journal of Financial Regulation and Compliance, vol. 28 no. 1
Type: Research Article
ISSN: 1358-1988

Keywords

Article
Publication date: 1 March 2006

Chao‐Chun Leng and Ursina B. Meier

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…

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Abstract

Purpose

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.

Design/methodology/approach

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

Findings

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.

Originality/value

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

Details

The Journal of Risk Finance, vol. 7 no. 2
Type: Research Article
ISSN: 1526-5943

Keywords

Article
Publication date: 6 November 2017

Minghua Ye, Rongming Wang, Guozhu Tuo and Tongjiang Wang

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…

Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Originality/value

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.

Details

China Agricultural Economic Review, vol. 9 no. 4
Type: Research Article
ISSN: 1756-137X

Keywords

Article
Publication date: 1 March 2006

Ursina B. Meier and J. François Outreville

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…

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Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Originality/value

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.

Details

The Journal of Risk Finance, vol. 7 no. 2
Type: Research Article
ISSN: 1526-5943

Keywords

Article
Publication date: 20 April 2015

Lukman Ayinde Olorogun

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…

1339

Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Originality/value

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.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 8 no. 1
Type: Research Article
ISSN: 1753-8394

Keywords

Article
Publication date: 10 December 2018

Rozaimah Zainudin, Nurul Shahnaz Ahmad Mahdzan and Ee Shan Leong

This study is an exploratory study investigating firm-specific internal factors that influence the profitability performance of selected life insurance firms in eight Asian…

1945

Abstract

Purpose

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.

Design/methodology/approach

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

Findings

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.

Practical implications

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.

Originality/value

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.

Details

Journal of Asia Business Studies, vol. 12 no. 4
Type: Research Article
ISSN: 1558-7894

Keywords

Article
Publication date: 1 January 2006

Chao‐Chun Leng

To examine whether the properties of the combined‐ratio series, an indicator of underwriting profitability in property‐liability insurance, have changed over time.

1021

Abstract

Purpose

To examine whether the properties of the combined‐ratio series, an indicator of underwriting profitability in property‐liability insurance, have changed over time.

Design/methodology/approach

Using the autocorrelation function (ACF) and partial autocorrelation function (PACF), we check whether combined ratios are stationary.

Findings

Underwriting profit has worsened in recent years, and combined ratios are non‐stationary. This characteristic of combined ratios needs further analysis for its impact on underwriting cycles.

Practical implications

Traditional concepts of underwriting cycles, such as predictable cycle lengths and trends, may have changed.

Originality/value

The possibility of a non‐stationary combined‐ratio series is recognized, and the possible existence of non‐stationarity and breaks in combined ratios is introduced.

Details

The Journal of Risk Finance, vol. 7 no. 1
Type: Research Article
ISSN: 1526-5943

Keywords

Article
Publication date: 2 November 2010

Zuriah Abdul Rahman and Norzaidi Mohd Daud

The purpose of this paper is to investigate first, the consumer buying behaviour and claims pattern of medical and health insurance (MHI)/medical and health takaful (MHT) policies…

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Abstract

Purpose

The purpose of this paper is to investigate first, the consumer buying behaviour and claims pattern of medical and health insurance (MHI)/medical and health takaful (MHT) policies and second, to determine whether moral hazard exists among policyholders at the time of application for the product and during claiming for compensation.

Design/methodology/approach

The study was conducted on respondents from the insurance industry in Malaysia.

Findings

It was found that most claims were rejected due to the discovery of some irregularities by the managed care organizations (MCO) while the Islamic insurer's claims experience, was otherwise. During the buying behaviour stage of MHT, there are fewer tendencies to withhold information but during the claiming stage, due to the generous level of compensation and their awareness of the coverage available naturally influence them to submit excessive claims. To a certain extent moral hazard is present when claims are made for longer disability durations than necessary, and having high average claims per person even for shorter duration disabilities.

Research limitations/implications

The paper concentrates only on the MHI/MHT in Malaysia.

Practical implications

The results provide insights on how the Malaysian insurance industry and other organizations of a similar structure could improve on their business performance.

Originality/value

This paper is perhaps one of the first to address adverse selection and its consequences on MHI/MHT in Malaysia.

Details

Humanomics, vol. 26 no. 4
Type: Research Article
ISSN: 0828-8666

Keywords

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