Reinsurance and Systemic Risk: The Impact of Reinsurer Downgrading on Property–Casualty Insurers

Park, Sojung Carol; Xie, Xiaoying

doi:10.1111/jori.12045

Cited by 51 publications

(34 citation statements)

References 36 publications

(48 reference statements)

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“…In one of the recent works on reinsurance, Park & Xie (2014) found out that the tendency of a primary underwriter's downgrade enhances with its reinsurance default in risk exposure from identical reinsurers, and that adverse influence also spills over to primary underwriters that have no direct exposure to the credit risks of downgraded reinsurers. Also purchasing reinsurance has been found to reduce the insolvent risk of ceding companies by stabilizing loss experience, confining liability with respect to specific risks, improving underwriting capacity, and safeguarding against catastrophes (Cummins, Dionne, Gagné & Nouira, 2008).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Insurance company too, in order to reduce its heavy obligations, seeks to transfer part of its risk burden to other organisations, the reinsurers (Garven, Hillard & Grace, 2014;Jirsarael, Kalantari, Kalantari, Jalah & Nozari, 2013). According to Park & Xie (2014), reinsurers are at the pinnacle of insurance market environment, because the abilities of reinsurers may bring about financial unrest within the insurance industry, which could result in spillover effect in the entire economy.…”

Section: Introductionmentioning

confidence: 99%

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Reinsurance and Performance of the Ceding Companies: The Nigerian Insurance Industry Experience

Aduloju

Ajemunigbohun

2017

Economics and Business

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Abstract. This paper examines the relationship between ceding office gross premium income, underwriting profit and financial stability. The study made use of primary and secondary data. The primary data were obtained from 246 respondents selected from those companies through the use of structured questionnaire. The secondary data obtained from the 2014 and 2015 published financials of the selected ten companies were used to determine the Reinsurance Ceded Ratio (RCR), Return on Asset (ROA), Return on Equity (ROE) as well as the Ratio of Reinsurance Recoverables to Policyholders Surplus (RRPHS). A descriptive research design was employed. The sampling technique adopted was purposive in nature. The study population comprises 56 insurance companies in Nigeria. More so, data collected was analysed using correlation analytical method. The results of this study are quite in line with previous studies and show that reinsurance purchase increases significantly the insurers' premium income. It is also shown that profitability of the firm is sensitive to change in reinsurance utilisation and has a positive relationship with it. It was established in the study that purchasing reinsurance reduces insurers' insolvency risk by stabilizing loss experience and increasing capacity. Recommendations were made.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Reinsurance and Performance of the Ceding Companies: The Nigerian Insurance Industry Experience

Aduloju

Ajemunigbohun

2017

Economics and Business

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“…Acharya et al (2011) points out that insurers with a significant VA book -3 In the interest of space, we concentrate on papers that study primary insurance. For a discussion of systemic risk as it relates to reinsurance see Weiss (2014), van Lelyveld et al (2011) and Park and Xie (2014).…”

Section: Systemic Risk In Insurancementioning

confidence: 99%

The Life Insurance Industry and Systemic Risk: A Bond Market Perspective

Paulson

Rosen

2016

Annu. Rev. Financ. Econ.

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: The 2008 financial crisis brought a focus on the potential for a large insurance firm to contribute to systemic risk. Among the concerns raised was that a negative shock to insurers could lead to a 'fire sale' of corporate bonds, a market where insurers are among the largest participants. This paper discusses the existing evidence on life insurance firms and systemic risk, with a focus on the investment grade corporate bond market. We provide some tentative evidence that life insurers tend to absorb liquidity risk by purchasing bonds when the bonds are less liquid than average. However, we do not find evidence that insurers increased bond purchases specifically during the financial crisis leaving open the question of whether insurers would play a stabilizing role in a future crisis. Terms of use: Documents in EconStor may

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“…These risks were considered in the papers [7][8][9][10][11]. In particular, Gatzert and Kolb (2014) examined the effects of operational risk on fair premiums and solvency capital requirements under Solvency II [9].…”

Section: Brief Literature Reviewmentioning

confidence: 99%

Improvement of the methodology for assessing the capital adequacy to cover the reinsurance default risk

Pukała¹,

Vnukova²,

Achkasova³

et al. 2017

EA-XXI

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Abstract. Introduction. The development of the insurance market in Ukraine is closely associated with the instruments used by domestic insurers to manage low capitalisation, including coinsurance and reinsurance services. Reinsurance helps insurance companies to take very large and expensive risks. Thus, the questions of generalisation of both national and international experience in default risk assessment of reinsurers in an insurance company and provision of recommendations to ensure reliability of activity of insurance companies are relevant. The purpose of the paper is to provide recommendations to improve capital adequacy assessment concerning the coverage of the reinsurance default risk. Methodology. The methodological basis of this study is the theory of insurance and insurance concepts. Scale measurement of capital adequacy of insurance companies relevant to the coverage of the reinsurance default risk was conducted by using methods of mathematical statistics. Results. Based on the example of 50 Ukrainian insurance companies, we have conducted scale measurement of capital adequacy to cover the default risk of reinsurers for the years of 2015-2016. The originality of the research lies in the improvement of capital adequacy assessment concerning the coverage of the reinsurance default risk, which, unlike the existing methodology, considers the designed scale and criteria of the capital adequacy indicator of the insurance company to cover the reinsurance default risk at «inadequate», «adequate», «medium», «good» and «excellent» levels. Conclusions. The practical value of the paper lies in the proposed approaches to improve capital adequacy assessment concerning the coverage of the reinsurance default risk, which will enhance the level of reinsurance and facilitate the fulfillment of obligations by insurance companies. Keywords: Reinsurance Default Risk; Methodology; Scale Measurement; Capital Adequacy; Insurance Company JEL Classification: F36; F38; F65; G22; G28 DOI: https://doi.org/10.21003/ea.V165-30 Пукала Р. кандидат економічних наук, проректор у справах студентів, Ярославська державна вища техніко-економічна школа ім. Броніслава Маркевича, Ярослав, Польща Внукова Н. М. доктор економічних наук, професор, завідувач кафедри управління фінансовими послугами, Харківський національний економічний університет імені Семена Кузнеця, Харків, Україна Ачкасова С. А. кандидат економічних наук, доцент, кафедра управління фінансовими послугами, Харківський національний економічний університет імені Семена Кузнеця, Харків, Україна Смоляк В. А. кандидат економічних наук, доцент, кафедра управління фінансовими послугами, Харківський національний економічний університет імені Семена Кузнеця, Харків, Україна Удосконалення методики оцінки достатності капіталу на покриття ризику дефолту перестраховика Анотація. У статті удосконалено методику оцінки достатності капіталу на покриття можливих збитків у разі настання ризику дефолту перестраховика, яка, на відміну від існуючих, враховує розроблені шкали та критерії для показни...

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Reinsurance and Systemic Risk: The Impact of Reinsurer Downgrading on Property–Casualty Insurers

Cited by 51 publications

References 36 publications

Reinsurance and Performance of the Ceding Companies: The Nigerian Insurance Industry Experience

Reinsurance and Performance of the Ceding Companies: The Nigerian Insurance Industry Experience

The Life Insurance Industry and Systemic Risk: A Bond Market Perspective

Improvement of the methodology for assessing the capital adequacy to cover the reinsurance default risk

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