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1 – 10 of 144Sylvester Senyo Horvey, Jones Odei-Mensah and Albert Mushai
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…
Abstract
Purpose
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.
Design/methodology/approach
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.
Findings
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.
Practical implications
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.
Originality/value
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.
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Chin-Chong Lee, Shaw Warn Too and Kuan San Ooi
Both issuing firms and underwriters shall benefit from the associations in underwriting contracts for seasoned equity offerings (SEOs). Issuing firms that are offered underwriting…
Abstract
Purpose
Both issuing firms and underwriters shall benefit from the associations in underwriting contracts for seasoned equity offerings (SEOs). Issuing firms that are offered underwriting contracts with clustered gross spreads do not have strong incentives to switch away from the firms' prior SEO underwriters, and thus these existing underwriters are able to maintain or gain greater market share. This study investigates how the clustering of percentage gross spreads affects the likelihood of underwriter switching.
Design/methodology/approach
Using the investment bank-underwritten SEOs in Hong Kong, the authors find that the percentage gross spreads of 40% of these SEOs are clustered at 2.5%. The seemingly unrelated bivariate probit model, Weibull survival mixed model and trivariate probit model are applied to analyse this phenomenon.
Findings
The authors' study provides first direct evidence that the clustering of percentage gross spreads lowers the likelihood of underwriter switching. Investment banks as underwriters can explicitly price underwriting contracts at a clustered level, more likely in periods of greater market volatility, and intentionally retain the banks' client firms using pricing arrangements. The authors' finding and approach offer more direct and distinct support that the issuer–underwriter association can be relationship-based.
Originality/value
Whilst the clustering of fees is interpreted as a type of anticompetitive price sitting, the authors contribute to literature by providing new empirical evidence on why percentage gross spreads as a price dimension are clustered. On top of contract efficiency and collusion, this study's new evidence provides a third view for the clustering of gross spreads.
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Abdelmoneim Bahyeldin Mohamed Metwally and Ahmed Diab
In developing countries, how risk management technologies influence management accounting and control (MAC) practices is under-researched. By drawing on insights from…
Abstract
Purpose
In developing countries, how risk management technologies influence management accounting and control (MAC) practices is under-researched. By drawing on insights from institutional studies, this study aims to examine the multiple institutional pressures surrounding an entity and influencing its risk-based management control (RBC) system – that is, how RBC appears in an emerging market attributed to institutional multiplicity.
Design/methodology/approach
The authors used qualitative case study research methods to collect empirical evidence from a privately owned Egyptian insurance company.
Findings
The authors observed that in the transformation to risk-based controls, especially in socio-political settings such as Egypt, changes in MAC systems were consistent with the shifts in the institutional context. Along with changes in the institutional environment, the case company sought to configure its MAC system to be more risk-based to achieve its strategic goals effectively and maintain its sustainability.
Originality/value
This research provides a fuller view of risk-based management controls based on the social, professional and political perspectives central to the examined institutional environment. Moreover, unlike early studies that reported resistance to RBC, this case reveals the institutional dynamics contributing to the successful implementation of RBC in an emerging market.
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Maya Vimal Pandey, Arunaditya Sahay and Abhijit Kumar Chattoraj
The objective of writing this case study is to allow management students to engage with the complexities of mergers and acquisitions (M&As) in the insurance sector in an emerging…
Abstract
Learning outcomes
The objective of writing this case study is to allow management students to engage with the complexities of mergers and acquisitions (M&As) in the insurance sector in an emerging economy like India. Upon completion of this case study, the students will be able to critically evaluate the business environment of the insurance sector of a developing economy like India, analyse the impact of M&As on the insurance industry of India, appraise the post-merger consequences and strategies to deal with these consequences, assess the applicability of market power and growth theories in the context of M&As and develop a strategic action plan for handling post-merger challenges.
Case overview/synopsis
On 3 September 2021, the Insurance Regulatory and Development Authority of India (IRDAI) approved the “Scheme” related to the merger of the non-life insurance division of Bharti AXA General Insurance Company Limited (“Bharti AXA”) with ICICI Lombard General Insurance Company Limited (“ICICI Lombard”). Earlier, on 21 August 2020, the boards of the companies had approved entering into definitive agreements through a scheme of arrangement. The merger received approvals from different regulatory bodies as mandated (Gandhi et al., 2023). Bhargav Dasgupta, managing director and Chief Executive Officer of ICICI Lombard, stated, “This is a landmark step in the journey of ICICI Lombard, and we are confident that this transaction would be value accretive for our shareholders” (FE Bureau, 2020). However, the merger posed a dilemma for Dasgupta and the management regarding crop insurance owing to its impact on profitability. Crop insurance historically had high claim ratios nearing 135% for ICICI Lombard for financial year 2018. The company ceased to underwrite this product from 2019 onwards (TNN, 2019). However, ICICI Lombard had to fulfil the three-year commitment made by Bharti AXA to the state governments of Maharashtra and Karnataka towards crop insurance. It was a scheme initiated by the Government of India, covering farmers against losses due to cyclonic rains, rainfall deficits and other unforeseen calamities. Dasgupta faced a challenge in managing the interests of the farmers and the company’s shareholders while balancing profitability, which had already been impacted by the COVID-19 pandemic. This case study delves into post-merger complexities in the financial sector non-life insurance industry in emerging countries like India.
Complexity academic level
This case study is suitable for undergraduate and post-graduate management students and executives from the insurance industry.
Supplementary materials
Teaching notes are available for educators only.
Subject code
CSS 11: Strategy.
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Vikas Gupta, Shveta Singh and Surendra S. Yadav
Small and medium enterprises (SMEs) play a crucial role in national economies worldwide, generating employment and contributing to innovation. This study tries to investigate the…
Abstract
Purpose
Small and medium enterprises (SMEs) play a crucial role in national economies worldwide, generating employment and contributing to innovation. This study tries to investigate the performance of the newly started IPO platform for the SMEs in India through a two-staged framework developed to measure pre-market and post-market underpricing separately and the impact of economic policy uncertainty (EPU) on the IPO returns using the EPU index which is based on newspaper coverage frequency. Further, the long-run performance of SME IPOs and the factors affecting the same have also been analyzed. The two-staged framework is helpful in capturing the impact of different factors separately on the two distinctive markets and providing effective investment strategies to the investors.
Design/methodology/approach
A sample of 384 SME IPOs issued during 2012–2018 has been analyzed using robust regression analysis.
Findings
The study highlights the fact that there are differences in the factors affecting pre-market and post-market underpricing and reports that investors subscription rate, issue expenses, lead manager reputation and EPU are positively associated, whereas the age of the firm is negatively associated with the pre-market underpricing, and lead manager reputation positively impacts the post-market underpricing whereas issue premium and pre-market underpricing are negatively associated. Pre-market underpricing subsumes all the impact of EPU (publicly available information) in it, hence providing credence to the semi-strong market hypothesis of the Efficient Market Hypothesis (EMH). The long-run performance of SME IPOs increases with time, and lead manager reputation, pre-market and post-market underpricing are positively related to the one-year return whereas issue size, turnover and issue expense are negatively related.
Originality/value
This paper is believed to be the first attempt to analyze the performance of SME IPOs by disaggregating IPO underpricing. The findings of this study will have a great insight for the investors and policymakers.
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The intent of this Practice Briefing is to provide clarity on drivers of property pricing in a changing economic environment. The principal basis of this analysis is to…
Abstract
Purpose
The intent of this Practice Briefing is to provide clarity on drivers of property pricing in a changing economic environment. The principal basis of this analysis is to investigate how properties have been priced relative to interest rates over the long haul. Such an insight may help investors navigate the world of property investment in a post zero interest-rate policy (ZIRP) world.
Design/methodology/approach
This practice briefing is an overview of the role of economic drivers in pricing property in different economic eras pre- and post-ZIRP. It looks at returns over time relative to risk criteria and growth.
Findings
This briefing is a review of property pricing and its relationship to economic drivers and discusses the concept of return premiums as a market indicator to spot under/over-priced property assets in the market.
Practical implications
This briefing considers the implications of identifying salient and pertinent market indicators over time as bellweathers for property pricing. Good property investment is grounded in understanding when assets are under and overpriced relative to investors’ expectations of growth and returns going forward. An understanding of markets and the current indicators thereof can provide investors with insights into those criteria.
Originality/value
This provides guidance on how to interpret markets and get an understanding of property pricing over time.
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Călin Mihail Rangu, Leonardo Badea, Mircea Constantin Scheau, Larisa Găbudeanu, Iulian Panait and Valentin Radu
In recent years, the frequency and severity of cybersecurity incidents have prompted customers to seek out specialized insurance products. However, this has also presented…
Abstract
Purpose
In recent years, the frequency and severity of cybersecurity incidents have prompted customers to seek out specialized insurance products. However, this has also presented insurers with operational challenges and increased costs. The assessment of risks for health systems and cyber–physical systems (CPS) necessitates a heightened degree of attention. The significant values of potential damages and claims request a solid insurance system, part of cyber-resilience. This research paper focuses on the emerging cyber insurance market that is currently in the process of standardizing and improving its risk analysis concerning the potential insured entity.
Design/methodology/approach
The authors' approach involves a quantitative analysis utilizing a Likert-style questionnaire designed to survey cyber insurance professionals. The authors' aim is to identify the current methods used in gathering information from potential clients, as well as the manner in which this information is analyzed by the insurers. Additionally, the authors gather insights on potential improvements that could be made to this process.
Findings
The study the authors elaborated it has a particularly important cyber and risk components for insurance area, because it addresses a “niche” area not yet proper addressed in specialized literature – cyber insurance. Cyber risk management approaches are not uniform at the international level, nor at the insurer level. Also, not all insurers can perform solid assessments, especially since their companies should first prove that they are fully compliant with international cyber security standards.
Research limitations/implications
This research has concentrated on analyzing the current practices in terms of gathering information about the insured entity before issuing the cyber insurance policy, level of details concerning the cyber security posture of the insured entity and way such information should be analyzed in a standardized and useful manner. The novelty of this research resides in the analysis performed as detailed above and the proposals in terms of information gathered, depth of analysis and standardization of approach made. Future work on the topic can focus on the standardization process for analyzing cyber risk for insurance clients, to improve the proposal based also on historical elements and trends in the market. Thus, future research can further refine the standardization process to analyze in more depth the way this can be implemented and included in relevant legislation at the EU level.
Practical implications
Proposed improvements include proposals in terms of the level of detail and the usefulness of an independent centralized approach for information gathering and analysis, especially given the re-insurance and brokerage activities. The authors also propose a common practical procedural approach in risk management, with the involvement of insurance companies and certification institutions of cyber security auditors.
Originality/value
The study investigates the information gathered by insurers from potential clients of cyber insurance and the way this is analyzed and updated for issuance of the insurance policy.
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Pavanpreet Kaur and Maninder Singh
In the era of Industrial Revolution (IR) 4.0, the integration of digital technologies, automation and data-driven insights has generated a broad wave of transformation across all…
Abstract
Purpose
In the era of Industrial Revolution (IR) 4.0, the integration of digital technologies, automation and data-driven insights has generated a broad wave of transformation across all industries, including the insurance sector. The study focuses on determining how the adoption of these technologies (InsurTech) is changing the life insurance industry, ultimately enhancing the level of customer satisfaction.
Design/methodology/approach
The data analysis has been performed with 304 useable responses from the policyholders of life insurance in the north-west region of India. The methodology adopted for this study is partial least squares (PLS) structural equation modeling (SEM). To investigate the predictive relevance of customer satisfaction, the PLS predict technique has been used. Also, importance performance map analysis (IPMA) has been applied to assess the important and performing dimensions of customer satisfaction.
Findings
The outcomes show that the adoption of InsurTech has a positive impact on customer satisfaction. Customer service management and policy management are among the strongest predictors of customer satisfaction, and the predictive relevance is reported to be moderate. IPMA results have suggested that improvements in online distribution of insurance services and customer service management lead to higher customer satisfaction.
Research limitations/implications
The conceptual model can be tested with the moderating effect of different demographic factors (age, gender etc.), and future research can be done to analyze the mediating role of customer satisfaction between InsurTech adoption and customer loyalty.
Practical implications
The study offers valuable contributions to the marketing literature, shedding light on the influence of InsurTech adoption on customer satisfaction within the Indian life insurance sector. The research offers a practical approach that could help marketing professionals and policymakers comprehend the utilization of online insurance services, and this understanding can help industry experts to develop customer-oriented products and services.
Originality/value
This research is the first of its kind to test the association between InsurTech adoption and customer satisfaction in the life insurance sector in the Indian context. Research also provides novel insights for policymakers to enhance the satisfaction of customers towards using online insurance services in the near future in developing countries like India.
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The goal of this chapter is to reexamine the nature and structure of the military–industrial complex (MIC) through the works of John Kenneth Galbraith. MIC, or military power as…
Abstract
The goal of this chapter is to reexamine the nature and structure of the military–industrial complex (MIC) through the works of John Kenneth Galbraith. MIC, or military power as he prefers, is a coalition of vested interests within the state and industry that promoted the military power in the name of “national security” for their interests. Galbraith’s theory of giant corporations helps us understand the role of military corporations in the MIC. Moreover, he is a critical scholar in examining this topic because he was a political insider in the Roosevelt, Kennedy, and Johnson administrations and a prominent public intellectual against the Vietnam War. Against this background, this chapter has three parts. After explaining the development of military Keynesianism with respect to the main economic thoughts, it examines the history of the MIC and its impact on economic priorities during and after the Cold War through Galbraith’s works. Finally, this chapter discusses MIC’s relevancy today and evaluates Galbraith’s prophecies.
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Vithyalani Muthusamy, Narayanage Jayantha Dewasiri, K. M. Rajeewa Chanaka Lankanatha, Kiran Sood and Simon Grima
The study explores the impact of the general insurance industry’s financial soundness on Sri Lanka’s financial performance by using the CARAMELS approach for seven years…
Abstract
The study explores the impact of the general insurance industry’s financial soundness on Sri Lanka’s financial performance by using the CARAMELS approach for seven years (2011–2019) and using secondary data. The study utilised panel data regression analysis. Return on Asset was used as the proxy of financial performance while the 10 dimensions were employed. The best-fitted model is the fixed effect model (FEM), which indicates capital adequacy ratio (CAR) and profitability ratio has a positive impact and that the retention ratio (RR), claims ratio, and expenses ratio harm financial performance in the general insurance sector. The study concluded that capital adequacy, earnings and profitability, reinsurance, and actuaries are important predictors of financial performance for general insurers. The findings help the regulator and general insurers set better performance targets and enable insurance company managers to allocate capital more efficiently.
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