Underwriting and investment risks in the property-liability insurance industry : Evidence prior to the 9-11 event
Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review
Author(s)
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Detail(s)
Original language | English |
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Pages (from-to) | 25-46 |
Journal / Publication | Review of Quantitative Finance and Accounting |
Volume | 38 |
Issue number | 1 |
Publication status | Published - Jan 2012 |
Link(s)
Abstract
Underwriting and investment are two important and related business activities of insurance companies. However, studies on the interrelation between underwriting and investment risks of Property-Liability (P-L) insurance companies are sparse in the literature. Using a sample of US P-L insurers, this article conducts an empirical investigation of how these two risks are associated with each other in the 1994-2000 period (before the September 11th terrorist attack in 2001). Our results, robust to various estimations, suggest that there is no significant relationship between the underwriting and investment risks among our sample firms. Such results based on pre 9-11 event period provide some support for the conjecture of Achleitner et al. (Geneva Pap Risk Insur Issues Pract 27:275-282, 2002) that many insurance companies may have failed to take an integrated approach to risk management. This resulted in a heavy loss due to dual exposures in both underwriting and investment in the 9-11 event. In the aftermath of the recent global financial crisis, risk taking and risk management of financial institutions have received more attention and increasing scrutiny. We believe the current paper provides some useful insights in this vein. © 2010 Springer Science+Business Media, LLC.
Research Area(s)
- Investment risk, P-L insurers, Risk-taking, Underwriting risk
Citation Format(s)
Underwriting and investment risks in the property-liability insurance industry: Evidence prior to the 9-11 event. / Zou, Hong; Wen, Min-Ming; Yang, Charles Chuanhou et al.
In: Review of Quantitative Finance and Accounting, Vol. 38, No. 1, 01.2012, p. 25-46.
In: Review of Quantitative Finance and Accounting, Vol. 38, No. 1, 01.2012, p. 25-46.
Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review