Solvency prediction for property-liability insurance companies : evidence from the financial crisis

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<title>Solvency prediction for property-liability insurance companies</title>
<subTitle>: evidence from the financial crisis</subTitle>
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<namePart>Rauch, Jannes</namePart>
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<namePart>Wende, Sabine</namePart>
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<abstract displayLabel="Summary">The financial crisis of 2008 generated sizeable losses in the financial sector around the world. Because regulators are used for predicting insurers' financial strength in order to detect financially distressed firms as early as possible, we question how reliably regulators can forecast financial strength, especially during a financial crisis. We use the company-level data of German property-liability insurers from 2004 to 2011 to examine factors that affect the insurer's regulatory solvency ratio. Furthermore, we develop a prediction model to classify the insurers regarding their financial strength. We show that, in particular, the lagged solvency ratio can be used to predict the future regulatory solvency ratio irrespective of the economic conditions. Thus, our results imply that German regulators are able to detect insurers in financial distress early enough to take appropriate actions to protect policyholders' interests. Our results do not support the adoption of tighter regulations or higher capital requirements.</abstract>
<note type="statement of responsibility">Jannes Rauch, Sabine Wende</note>
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<topic>Seguro de daños patrimoniales</topic>
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<topic>Solvencia</topic>
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<topic>Empresas de seguros</topic>
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<topic>Entidades financieras</topic>
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<topic>Legislación de seguros</topic>
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<subject xmlns:xlink="http://www.w3.org/1999/xlink" xlink:href="MAPA20080579814">
<topic>Crisis financiera</topic>
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<topic>Predicciones económicas</topic>
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<topic>Mercado de seguros</topic>
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<title>Geneva papers on risk and insurance : issues and practice</title>
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<publisher>Geneva : The Geneva Association, 1976-</publisher>
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<identifier type="issn">1018-5895</identifier>
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<text>05/01/2015 Volumen 40 Número 1 - enero 2015 , p. 47-65</text>
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