The Relationship between regulatory pressure and insurer risk taking

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      <subfield code="a">The Relationship between regulatory pressure and insurer risk taking</subfield>
      <subfield code="c">Wen-Chang Lin, Yi-Hsun Lai, Michael R. Powers</subfield>
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      <subfield code="a">The article examines the risk-taking behavior of propertyliability insurers in the presence of risk-based capital regulation. An option pricing model is developed to evaluate the expected regulatory cost and predict a nonlinear relationship between regulatory pressure and insurers¿ risk taking. We then conduct an empirical test using the simultaneous threshold regression. The result shows that there is a threshold effect of regulatory pressure on insurer risk taking. Poorly capitalized insurers seem to be aware of their proximity to regulatory interventions but do not fully respond to the impending regulatory pressure. This implies either regulatory interventions are not costly enough or they are too late, or both.</subfield>
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      <subfield code="w">MAP20077000727</subfield>
      <subfield code="t">The Journal of risk and insurance</subfield>
      <subfield code="d">Nueva York : The American Risk and Insurance Association, 1964-</subfield>
      <subfield code="x">0022-4367</subfield>
      <subfield code="g">02/06/2014 Volumen 81 Número 2 - junio 2014 </subfield>
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