An Empirical Research into the Heterogeneity Characteristics of Property Insurers' Capital, Solvency and Risk Adjustment

Abstract

Abstract:

Using the panel data of 46 property insurance companies from 2009 to 2014, this paper constructs threshold effect simultaneous equations in relation to their capital, solvency and risk adjustment to study the regulatory threshold effect and heterogeneity characteristics of capital and risk adjustment. We find that, there are two thresholds for the underwriting risk, which are 362.94% and 189.99%, and there are also two thresholds for the capital adjustment, which are 167.42% and 368.51%. The results of threshold regression model show that, although regulatory pressure has some constraint effect on capital and risk adjustment, property insurance companies have not formed benign interaction mechanism. We also find that the benign interaction mechanism between capital and risk adjustment of middle regulatory pressure region is better than that of low regulatory pressure region and high regulatory pressure region, so property insurance companies should position themselves in the moderate supervision environment.

Key words: property insurance industry, solvency, heterogeneity characteristics, threshold effect

Chen Hua, Wang Lizhen. An Empirical Research into the Heterogeneity Characteristics of Property Insurers' Capital, Solvency and Risk Adjustment[J]. , 2017, 29(8): 33-42.

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