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Article
Publication date: 1 July 1996

Roger M. Shelor, Dennis T. Officer and Mark L. Cross

This study examines the market reaction when announcements of large dividend increases are made by more versus less rate‐regulated firms in the same industry. The insurance

Abstract

This study examines the market reaction when announcements of large dividend increases are made by more versus less rate‐regulated firms in the same industry. The insurance industry was chosen because property/liability insurers are rate‐regulated more than life/health insurers. The abnormal returns are positive and significant for all insurers but smaller than those found in previous cross‐sectional studies. Abnormal returns for the less rate‐regulated life/health insurers during the dividend increase announcement period are significantly greater than those of the more rate‐regulated property/liability insurers.

Details

Managerial Finance, vol. 22 no. 7
Type: Research Article
ISSN: 0307-4358

Article
Publication date: 13 April 2012

Fang Sun, Xiangjing Wei and Yang Xu

The purpose of this paper is to investigate two audit committee characteristics – independence and expertise of the audit committee – and the property‐liability insurers'…

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Abstract

Purpose

The purpose of this paper is to investigate two audit committee characteristics – independence and expertise of the audit committee – and the property‐liability insurers' financial reporting quality, which is proxied by loss reserve error.

Design/methodology/approach

The authors' hypotheses are tested using multivariate analysis where the loss reserve error is the dependent variable, and audit committee independence, and four types of audit committee financial expertise (accounting, finance, supervisory, and insurance expertise) are the testing variables.

Findings

It is found that accounting, finance, and insurance financial expertise are associated with more accurate loss reserve estimate. In contrast, a supervisory financial expertise and an independence audit committee are not found to be associated with better loss reserve quality.

Research limitations/implications

The sample includes publicly‐held property‐liability insurers. Although the results from publicly‐held insurers could provide a good laboratory for such investigation in all insurers, they might be limited due to different organization structures of public vs private insurers.

Practical implications

The implications of the study are important for the SEC and NAIC. The results suggest that the requirements on the audit committee financial expertise would be necessary, even in highly regulated industry, such as property‐casualty insurance.

Originality/value

The paper contributes to the extant literature by studying audit committee characteristics in the insurance industry. It also contributes to the extant literature on audit committee effectiveness by decomposing the financial expertise into four types of financial expertise (accounting, finance, supervisory, or insurance expertise) and investigates which (if any) of these four types of expertise really drives the improvement of loss reserve quality.

Article
Publication date: 1 March 2007

Yuhua Qiao

Public risk management is a relatively new but important element of public management and public budgeting. As research in this area is limited, this study attempts to advance…

Abstract

Public risk management is a relatively new but important element of public management and public budgeting. As research in this area is limited, this study attempts to advance knowledge on two specific elements of public risk management based on a survey sent to the Public Risk Management Association (PRIMA) members in 2002. 1) How do public entities use various risk funding techniques (e.g., purchasing insurance, self-insurance, and intergovernmental risk pools)? 2) Have public entities implemented integrated risk management in their risk management practices? The survey found evidence that integrated risk management is emerging in public risk management practice. As this is an exploratory study, the author also identifies a series of questions for future research.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 19 no. 1
Type: Research Article
ISSN: 1096-3367

Article
Publication date: 14 August 2023

Habib Jouber

This study aims to investigate the relationship between boardroom gender diversity (BoGD) and risk-taking by property-liability (P-L) stock insurers from an analytical framework…

Abstract

Purpose

This study aims to investigate the relationship between boardroom gender diversity (BoGD) and risk-taking by property-liability (P-L) stock insurers from an analytical framework that control for organizational form and ownership structure. It relies on the behavioral agency model, the resource dependency theory and the concept of socioemotional wealth (SEW).

Design/methodology/approach

This study builds on an unbalanced panel of 2,285 firm-year observations from 232 European and US P-L stock insurers covering the period 2010–2019 and measure risk-taking by using four proxies: total risk (TR), upside risk (UpR), downside risk (DwR) and default risk (DR). Reverse causality and endogeneity concerns are treated by applying different approaches.

Findings

Findings suggest that BoGD mitigates the TR, DwR and DR but does not interfere with the UpR, which conceptualizes firm expectations to enhance patrimony and safeguard SEW for heirs, especially in family-owned insurers. The findings hold in various robustness checks including endogeneity and alternative specifications of BoGD and risk-taking.

Practical implications

This study contributes to practice by contrasting the role of female directors’ bevahior when assuming risk, which seems significantly different depending on the risk-taking specification and the organizational form. The author advises policyholders and policymakers to look at closely on BoGD and ownership structure as they affect insurance company risk-taking.

Originality/value

This study takes a more direct approach to highlight the BoGD’s effect on corporate risk-taking by focusing on the insurance sector which is characterized by risk and uncertainty bearing. To the best of the author’s knowledge, this is the first study to consider the full range of the stock organizational forms and the degree of family control in displaying this effect in both widely traded and closely traded insurers and to assess risk-taking from both market-based and accounting-based aspects.

Details

Corporate Governance: The International Journal of Business in Society, vol. 24 no. 2
Type: Research Article
ISSN: 1472-0701

Keywords

Book part
Publication date: 16 December 2002

Joon-Hai Chung and Mary A. Weiss

The puzzle of underwriting cycles and insurance crises in property-liability insurance has led to numerous economic hypotheses and analyses, yet no single theory seems capable of…

Abstract

The puzzle of underwriting cycles and insurance crises in property-liability insurance has led to numerous economic hypotheses and analyses, yet no single theory seems capable of explaining all of its aspects. Reinsurance is hypothesized to be a potential factor in observed cycles in the primary market; despite this, few underwriting cycle studies focusing on reinsurance exist. The purpose of this research is to apply two principal underwriting cycle theories: the capacity constraint and risky debt hypotheses, to non-proportional property and casualty reinsurance in the U.S. Non-proportional reinsurance is highlighted, since it is designed to cover the tail of the loss distribution and is considered to be relatively riskier than proportional reinsurance as a result. Two professional U.S. reinsurer samples are studied, one for property and one for casualty; U.S. reinsurers in each sample were chosen on the basis of their non-proportional property (casualty) writings. The sample period is 1991 to 1995. The results support both the capacity constraint hypothesis and the risky debt hypothesis, and this is the first research to do so. A major innovation in this study is the use of capacity variables that are broken down by major region of the world

Details

Global Risk Management: Financial, Operational, and Insurance Strategies
Type: Book
ISBN: 978-1-84950-189-7

Case study
Publication date: 1 January 2011

Patricia Chew and Jochen Wirtz

Market development; market analysis; customer incentive programmes and segmentation.

Abstract

Subject area

Market development; market analysis; customer incentive programmes and segmentation.

Study level/applicability

Undergraduate Business and Management, MBA/MA Management.

Case overview

The Singapore subsidiary of AHL Insurance Corporation (AHL) was trying to expand its customer base through a “recommend-a-friend” programme. Ideally, the incentives would encourage the top tier customers to refer more friends to help AHL further penetrate the market and expand its customer base. Instead, the programme worked the reverse on these customers and referrals from “Apostles” fell. Ray Stevenson had to find out why this was so and think of a way to rectify the problem.

Expected learning outcomes

This case will enable students to analyse a business decision which ultimately proved unsuccessful to the point of adverse market reaction. Students will examine the reasons for this poor market perception; conduct analysis of field test data and provide managerial conclusions and recommendations identifying the correct course of action.

Supplementary materials

Teaching notes.

Details

Emerald Emerging Markets Case Studies, vol. 1 no. 1
Type: Case Study
ISSN: 2045-0621

Keywords

Article
Publication date: 3 April 2018

Davood Gharakhani, Abbas Toloie Eshlaghy, Kiamars Fathi Hafshejani, Reza Kiani Mavi and Farhad Hosseinzadeh Lotfi

Conventional data envelopment analysis (DEA) models permit each decision-making unit (DMU) to assess its efficiency score with the most favorable weights. In other words, each DMU…

Abstract

Purpose

Conventional data envelopment analysis (DEA) models permit each decision-making unit (DMU) to assess its efficiency score with the most favorable weights. In other words, each DMU selects the best weighting schemes to obtain maximum efficiency for itself. Therefore, using different sets of weights leads to many different efficient DMUs, which makes comparing and ranking them on a similar basis impossible. Another issue is that often more than one DMU is evaluated as efficient because the selection of weights is flexible; therefore, all DMUs cannot be completely differentiated. The purpose of this paper is to development a common weight in dynamic network DEA with a goal programming approach.

Design/methodology/approach

In this paper, a goal programming approach has been proposed to generate common weights in dynamic network DEA. To validate the applicability of the proposed model, the data of 30 non-life insurance companies in Iran during 2013-2015 have been used for measuring their efficiency scores and ranking all of the companies.

Findings

Findings show that the proposed methodology is an effective and practical approach to measure the efficiency of DMUs with dynamic network structure.

Originality/value

The proposed model delivers more knowledge of the common weight approaches and improves the DEA theory and methodology. This model makes it possible to measure efficiency scores and compare all DMUs from multiple different standpoints. Further, this model allows one to not only calculate the overall efficiency of DMUs throughout the time period but also consider dynamic change of the time period efficiency and dynamic change of the divisional efficiency of DMUs.

Article
Publication date: 31 August 2012

Maria Teresa Medeiros Garcia

The purpose of this paper is to investigate empirically the relationship between property‐liability insurance premiums and economic and financial development in the case of…

1005

Abstract

Purpose

The purpose of this paper is to investigate empirically the relationship between property‐liability insurance premiums and economic and financial development in the case of Portugal, assuming a supply‐leading causality pattern of development. In other words, the expansion of the financial system precedes the demand for services.

Design/methodology/approach

The paper conducts OLS estimations between premiums and the gross domestic product (GDP) in order to evaluate the economic growth, in addition to the ratio of the broader definition of money (M2) to GDP and the ratio of currency to demand deposits (M1/M2), in order to assess financial development.

Findings

The level of the gross domestic product is the only factor explaining the level of property‐liability insurance demand in Portugal.

Originality/value

To the best of the author's knowledge, this is the first attempt to examine determinants of property‐liability casualty insurance in Portugal, using time series data.

Details

Journal of Economic Studies, vol. 39 no. 4
Type: Research Article
ISSN: 0144-3585

Keywords

Book part
Publication date: 20 March 2007

Robert W. Cooper

Occasional, highly publicized examples of unethical behavior by executives of major businesses such as the unethical/illegal brokerage and financial reporting practices uncovered…

Abstract

Occasional, highly publicized examples of unethical behavior by executives of major businesses such as the unethical/illegal brokerage and financial reporting practices uncovered recently by New York Attorney General Eliot Spitzer's investigation of the insurance industry may be thought to have arisen from some rather unique set of ethical problems that differ significantly from the ethical dilemmas encountered daily by those working in the business. In reality, they did not. Instead, these highly publicized unethical activities on the part of leading brokerage firms and insurers are shown to be attributable to several of the same key ethical issues identified repeatedly by insurance professionals as presenting the greatest ethical challenges for those working in the insurance industry over the last decade and a half.

Details

Insurance Ethics for a More Ethical World
Type: Book
ISBN: 978-1-84950-431-7

Article
Publication date: 15 May 2017

Muhammed Altuntas and Jannes Rauch

This paper aims to examine the effect of concentration in the insurance sector on insurer stability for a large set of developed and developing countries. In particular, the…

Abstract

Purpose

This paper aims to examine the effect of concentration in the insurance sector on insurer stability for a large set of developed and developing countries. In particular, the authors test whether concentration reduces financial fragility in the insurance sector (“concentration-stability view”) or decreases stability in the insurance sector (“concentration-fragility view”).

Design/methodology/approach

The authors use a data set of 14,402 firm-year observations of property-liability insurers who appear in A.M. Best’s Statement File Global database during the period 2004-2012. They use regression analyses to examine the effect of concentration on the stability of insurance firms and apply different measures of concentration.

Findings

The results provide empirical support for the “concentration- fragility view”; that is, higher levels of concentration are associated with decreases in the insurance sector’s financial stability.

Research limitations/implications

The results have important policy implications, given that a primary purpose of insurance regulation is to protect policyholders against insurance firm defaults.

Originality/value

No previous research analyzes how recent trends in competition and consolidation, which have led to changes in insurance market concentration, affect the stability of insurance firms around the world. This research is the first paper that provides evidence on the relation between concentration and stability in the insurance sector.

Details

The Journal of Risk Finance, vol. 18 no. 3
Type: Research Article
ISSN: 1526-5943

Keywords

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