Are non-risk based capital requirements for insurance companies binding?

Haan, Leo de; Kakes, Jan

doi:10.1016/j.jbankfin.2010.03.008

Cited by 59 publications

(54 citation statements)

References 30 publications

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“…Our prediction is that higher profitability is related to decreases in an insurer's contribution to systemic risk because more profitable insurers also have higher solvency margins and a lower risk of insolvency (see also De Haan and Kakes, 2007). Income variability, on the other hand, is expected to be positively related to our measures of systemic risk because more volatile profits could be indicative of an elevated level of risk-taking by the insurer.…”

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confidence: 90%

Why do some insurers become systemically relevant?

Weiß

Mühlnickel

2014

Journal of Financial Stability

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Are some insurers relevant for the stability of the financial system? And if yes, what firm fundamentals and aspects of insurers' business models cause them to destabilize an entire financial sector? We find that several insurers did indeed contribute significantly to the instability of the U.S. financial sector during the recent financial crisis. We empirically confirm that insurers that were most exposed to systemic risk were larger, relied more heavily on non-policyholder liabilities and had higher ratios of investment income to net revenues on average. Contrary to current conjectures of insurance regulators, we find that the contribution of insurers to systemic risk is only driven by insurer size.

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confidence: 90%

Why do some insurers become systemically relevant?

Weiß

Mühlnickel

2014

Journal of Financial Stability

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“…Other things equal, insurers operating in riskier (higher volatility) lines of business have a greater need for reinsurance than insurers, which underwrite lower volatility business (de Haan and Kakes, ). Insurers exposed to higher underwriting risk also have more uncertain future cash flows than insurers exposed to lower underwriting risk (Lamm‐Tennant and Starks, ).…”

Section: Methodsmentioning

confidence: 99%

On the Corporate Demand for Insurance: Evidence From the Global Reinsurance Market

Altuntas¹,

Garven²,

Rauch³

2018

Risk Manage Insurance Review

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In this article, we view the demand for reinsurance as a "special case" of the corporate demand for insurance. We analyze the extent to which reinsurance purchases by the global property-liability insurance industry vary across countries and assess the relative importance of country-level factors compared with firm-level factors. Using a data set consisting of 21,814 firm-year observations from 33 (developed and developing) countries during the period 2000-2012, we find that after controlling for firm-level factors, country-level factors have economically as well as statistically significant effects on the demand for reinsurance.

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“…Insurance companies in the United States are regulated by The National Association of Insurance Commissioners (NAIC) while insurers in the European Union's (EU) are supervised by the Organization for Economic Co-Operation and Development (OECD) (de Haan & Kakes, 2010); (Pitselis, 2009). NAIC adopted three risk capital measurement which is the Insurance Regulatory Information System (IRIS), Risk-Based Capital (RBC) and the Financial Analysis and Surveillance Tracking (FAST) to monitor the financial condition of an insurance company and to prevent insolvency.…”

Section: Literature On Risk-based Capitalmentioning

confidence: 99%

Risk-Based Capital Framework: Conventional vs. Takaful Operators

Yusof

Lau²,

Osman³

2015

jmr

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Malaysia introduced an RBC framework for its conventional insurance industry in 2009. In 2011, enhancements to the RBC framework were completed. In an effort to improve the overall Takaful regulatory framework, BNM issued new operational and valuation guidelines on 23 September 2010. BNM further issued the draft of risk-based capital (RBC) guidelines for Takaful operators in April 2011 and gathered the industry's feedback (Dhesi, 2012). The proposed Takaful RBC framework appears to be similar to that imposed for a conventional business. Parallel to its counterpart, Takaful operators are obliged to have at least 130% of ISSN 1941-899X 2015 www.macrothink.org/jmr 2 supervisory capital-adequacy ratio (CAR). The minimum CAR imposed is formulated so that Takaful operators have sufficient capital in the shareholders' fund to meet any shortage in Takaful fund. Capital adequacy is a theoretical amount of capital that is required by each insurance company in order to meet payment obligations and support everyday operation without becoming insolvent. The same methodology and assumptions as outlined in the RBC requirements for conventional business have been used to determine each of these capital charges (Dhesi, 2012). However, Conventional insurer and Takaful operators are having different types of risk for their operations (Obaidullah, 1998). Takaful operators also adopt different types of operating models (mudharabah, wakalah and hybrid). The RBC-framework for conventional insurers provides detailed guidelines on the estimation of assets by considering the different types of risks related. Still, the RBC framework for Takaful operators insufficiently addresses the risk that relevant to Takaful operator's activities. The main point that distinguishes Takaful operators and its counterparts is in terms of the sharing of risk with customers. Journal of Management Research

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Are non-risk based capital requirements for insurance companies binding?

Cited by 59 publications

References 30 publications

Why do some insurers become systemically relevant?

Why do some insurers become systemically relevant?

On the Corporate Demand for Insurance: Evidence From the Global Reinsurance Market

Risk-Based Capital Framework: Conventional vs. Takaful Operators

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