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

Altuntas, Muhammed; Garven, James R.; Rauch, Jannes

doi:10.1111/rmir.12107

Cited by 8 publications

(4 citation statements)

References 74 publications

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“…In accordance with the financial distress hypothesis of risk management, the study's panel data regression results indicated a negative significant relationship between leverage and income retention by Property and Liability insurance firms. These findings are in line with majority of the findings such as Altuntas et al (2018) and Curak et al (2014).…”

Section: Empirical Literature Reviewsupporting

confidence: 92%

Effect of leverage on income retention of general insurers in East Africa

Nyandwi,

Njuguna,

Achoki

2023

TUJ

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The purpose of this research was to determine the effect of leverage on income retention of generalinsurers in East Africa. The study adopted explanatory sequential mixed methods research design whichconsists of collecting and analysing secondary data first and subsequently collecting primary data toget deeper insight on the results from secondary data. For secondary data, a census was conducted on the total population of 87 general insurance companies in existence during the period of study from2015 to 2019 across Kenya, Uganda, Tanzania, Rwanda and Burundi. Data were obtained frominsurance regulatory reports, company annual reports and through data collection sheets where reportswere not available. The primary data phase consisted of in-depth interviews carried out on a stratifiedsample of 25 key informants across the five countries. Both descriptive and inferential statistics wereused to analyse the data. The regression results indicate that leverage, as measured by debt to equityratio, has a negative and significant effect on income retention of general insurers in East Africa (β1=-0.02337, p-value = 0.001). According to the details per country, this negative relationship is significantfor Kenya and Rwanda while insignificant for Tanzania, Uganda and Burundi. The study recommendsthat insurance companies should hold adequate equity relative to their liabilities to enhance theirincome retention.

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Section: Empirical Literature Reviewsupporting

confidence: 92%

Effect of leverage on income retention of general insurers in East Africa

Nyandwi,

Njuguna,

Achoki

2023

TUJ

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“…The amount of capital invested, and the reinsurance acquired must be balanced for the insurance companies because the capital requirements are impacted by this balance (Altuntas et al, 2018). In this way, a capital structure issue is the demand for reinsurance (Cummins et al, 2021).…”

Section: Literature Reviewmentioning

confidence: 99%

Factors Influencing Reinsurance Costs of Nepalese General Insurers

Adhikari,

Kumar

2023

Bi-annual S. Asian J. Res. Innov.

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Although reinsurance is a ubiquitous practice in the insurance industry, it is not devoid of associated costs. In order to obtain the pledge of reinsurers, who are essential in sharing any risks/Losses, insurers are required to pay specific costs. The primary objective of this article is to examine firm-level variables that might have an influence on an insurance company's reinsurance costs. A study of the relationship between reinsurance costs and several financial and technical ratios, which are regarded as effective monitoring tools for insurers, has been accomplished in order achieve the aforementioned objective. Using panel data analysis, the relationship between reinsurance costs and both financial and technical indicators has been carefully examined. The information, which includes variables from 14 General insurance firms between the years 2010 and 2022, was obtained from the authorized portal of the Nepal Insurance Authority (NIA). One model focused on financial ratios, while the other went in-depth with technical ratios. Additionally, the analyses were revised to consider the 2015 Major earthquake and recent COVID-19 timeframe, revealing possible effects at these particular times. The findings of the study revealed an interesting observation regarding the impact of various financial and technical ratios on reinsurance costs. Financial ratios, such as return on assets and debt ratio, as well as the technical ratio, retention ratio, had a significant negative impact on reinsurance expenses. In other words, as profits, debt levels, and retention ratios rise, insurance companies become less willing to bear insurance costs and prefer to bear a greater portion of the risks. Even after accounting for the disruptive periods of the2015 Major earthquake and recent COVID-19 pandemic, these variables maintained their negative influence on reinsurance costs. In addition, the Net Combined Ratio emerged as an additional significant determinant of reinsurance costs when the data from the COVID-19 were excluded. This suggests that the Net Combined Ratio continues to have a significant impact on reinsurance costs even in the absence of this crisis period. Reinsurance is required as long as there is an insurance industry, which makes its existence essential. To prevent potential severe damages brought on by occurrences like fire, flood, or earthquake, these two sectors must work closely together. However, as with any transaction in this economic system, there are expenses involved in the process of reinsuring an insurance contract. According to research, several variables, particularly the return on assets, debt ratio, and retention ratio, are important in determining how much reinsurance will cost.

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“…Therefore, our dependent variable needs to be a proxy of reinsurance use. We use a measure that is common in the reinsurance literature and define the variable Reinsurance Ratio as the ratio between reinsurance premiums ceded and the sum of the direct premiums written and reinsurance premiums assumed (Mayers and Smith 1990;Choi and Weiss 2005;Cole and McCullough 2006;Wang et al 2008;Shiu 2011;Lee and Lee 2012;Garven et al 2014;Lin et al 2015;Yanase and Limpaphayom 2017;Altuntas et al 2018).…”

Section: Dependent Variablementioning

confidence: 99%

Risk transfer beyond reinsurance: the added value of CAT bonds

Götze

Gürtler

2021

Geneva Pap Risk Insur Issues Pract

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Reinsurance and CAT bonds are two alternative risk management instruments used by insurance companies. Insurers should be indifferent between the two instruments in a perfect capital market. However, the theoretical literature suggests that insured risk characteristics and market imperfections may influence the effectiveness and efficiency of reinsurance relative to CAT bonds. CAT bonds may add value to insurers’ risk management strategies and may therefore substitute for reinsurance. Our study is the first to empirically analyse if and under what circumstances CAT bonds can substitute for traditional reinsurance. Our analysis of a comprehensive data set comprising U.S. P&C insurers’ financial statements and CAT bond use shows that insurance companies’ choice of risk management instruments is not arbitrary. We find that the added value of CAT bonds mainly stems from non-indemnity bonds and reveal that (non-indemnity) CAT bonds are valuable under high reinsurer default risk, low basis risk and in high-risk layers.

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

Cited by 8 publications

References 74 publications

Effect of leverage on income retention of general insurers in East Africa

Effect of leverage on income retention of general insurers in East Africa

Factors Influencing Reinsurance Costs of Nepalese General Insurers

Risk transfer beyond reinsurance: the added value of CAT bonds

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