Universität zu Köln

Rauch, Jannes and Wende, Sabine ORCID: 0000-0003-3055-0663 (2015). Solvency Prediction for Property-Liability Insurance Companies: Evidence from the Financial Crisis. Geneva Pap. Risk Insur.-Issues Pract., 40 (1). S. 47 - 66. BASINGSTOKE: PALGRAVE MACMILLAN LTD. ISSN 1468-0440

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Abstract

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.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Rauch, Jannes UNSPECIFIED UNSPECIFIED UNSPECIFIED Wende, Sabine UNSPECIFIED orcid.org/0000-0003-3055-0663 UNSPECIFIED
URN:	urn:nbn:de:hbz:38-418077
DOI:	10.1057/gpp.2014.16
Journal or Publication Title:	Geneva Pap. Risk Insur.-Issues Pract.
Volume:	40
Number:	1
Page Range:	S. 47 - 66
Date:	2015
Publisher:	PALGRAVE MACMILLAN LTD
Place of Publication:	BASINGSTOKE
ISSN:	1468-0440
Language:	English
Faculty:	Unspecified
Divisions:	Unspecified
Subjects:	no entry
Uncontrolled Keywords:	Keywords Language RISK; INSOLVENCY; DISTRESS; INDUSTRY; MODEL; RATIOS; LOGIT Multiple languages Business, Finance Multiple languages
URI:	http://kups.ub.uni-koeln.de/id/eprint/41807