The informational value of insurance purchases: evidence from the property-liability insurance market

Article Abstract:

A formal model of the informational value of insurance is proposed as a useful tool in making investment and consumption decisions concerning wealth levels. Informational value is presented as a determinant in the activities of risk-neutral consumers and corporations which induces wealth dependent choices and elicits better cash flows. Results from analysis of a property-liability insurance market indicate the tendency to pay for insurance with prolonged resolution periods with positive informational value is greater, hinting that other financial assets may also possess differential informational value.

Economics, Research and Development in the Social Sciences and Humanities, Insurance, Utility theory, Utility functions, Information measurement

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Capital and risk property-liability insurance markets

Article Abstract:

An option theory-based model was developed to analyze the capital and portfolio risk decisions of property-liability insurance companies. The model was tested using a simultaneous equations methodology which showed that a positive relationship exists between insurer capital and risk in terms of achieving overall insolvency risk. The results also showed that managerial incentives are important factors that influence capital and insurance decisions among insurance companies.

Decision-making, Decision making, Insurance industry, Portfolio management, Risk management

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Insolvency experience, risk-based capital, and prompt corrective action in property-liability insurance

Article Abstract:

The effectiveness of the risk-based capital measurement for property-liability insurers as implemented by the National Assn. of Insurance Commissioners in 1993 is evaluated. A sample of bankrupt insurers covering the period 1989-1993 is used in the analysis. Results show that the formula needs enhancements since it fails to predict insolvency expenses to a reasonable degree.

Standards, Evaluation, Bankruptcy, National Association of Insurance Commissioners

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