We analyze the impact of factors related to corporate governance (i.e., compensation, monitoring, and ownership structure) on risk taking in the insurance industry. We measure asset, product, and financial risk in insurance companies and employ a structural equation model in which corporate governance is modeled as a latent factor. Based on this model, we present empirical evidence on the link between corporate governance and risk taking, considering insurers from two large European insurance markets. Higher levels of compensation, increased monitoring (more independent boards with more meetings), and more blockholders are associated with lower risk taking. Our empirical results provide justification for including factors related to corporate governance in insurance regulation.
In dieser Arbeit analysieren wir Versicherungszyklen in der deutschen KFZ-Versicherung anhand von Daten der letzten 50 Jahre. Ein besonderes Augenmerk wurde dabei auf den so genannten Aggregations-Bias gelegt, der durch die Zusammenfassung verschiedener Versicherungszweige zu einer Gesamtmarktstatistik entsteht. In der Literatur wurden Versicherungszyklen bereits für viele internationale Märkte und für zahlreiche Versicherungszweige berechnet. Auch in der deutschen KFZ-Versicherung sind Zyklen auffindbar. Je nach betrachtetem Zeitfenster und Versicherungszweig lassen sich Werte zwischen etwa sechs und zehn Jahren identifizieren, wobei in den letzten Jahren ein leichter Anstieg zu beobachten ist. Die berechneten Zykluslängen lassen sich dabei gut in den Kontext internationaler Vergleichsstudien einordnen.
This paper analyzes price competition in the German motor insurance market since 1994 and looks for evidence to back up a claim frequently found in the trade literature-that there have been two recent price wars in this industry, the first in 1996-1999, the second in 2005-2006. In a first step, we analyze development of the German motor insurance market and compare it to that of other property-liability lines of business. In a second step the applicability of price war definitions found in the marketing literature to the German motor insurance market is checked. In a third step, a comparison to reference cases from other industries, where price wars have been subject to academic analysis, is conducted to complement the analysis. We conclude that, contrary to reports in the trade literature, the periods of 1996-1999 and 2005-2006 should be considered as times of in-tense competition in the motor insurance industry, not as times of price war.
The purpose of this paper is to provide an overview on frontier efficiency measurement in the insurance industry, a topic of great interest in the academic literature during the last several years. We provide a comprehensive survey of 95 studies with a special emphasis on innovations and recent developments. We review different econometric and mathematical programming approaches to efficiency measurement in insurance and discuss the choice of input and output factors. Furthermore, we categorise the 95 studies into 10 different areas of application and discuss selected results. While there is a broad consensus with regard to the choice of methodology and input factors, our review reveals large differences in output measurement. Significant need for future research can be identified, for example, with regard to analysis of organisational forms, market structure and risk management, especially in the international context.
The purpose of this paper is to provide new empirical evidence on frontier efficiency measurement in the international insurance industry, a topic of great interest in the academic literature during the last several years. A broad efficiency comparison of 6462 insurers from 36 countries is conducted. Different methodologies, countries, organizational forms, and company sizes are compared, considering life and non-life insurers. We find a steady technical and cost efficiency growth in international insurance markets from 2002 to 2006, with large differences across countries. Denmark and Japan have the highest average efficiency, whereas the Philippines is the least efficient. Regarding organizational form, the results are not consistent with the expense preference hypothesis, which claims that mutuals should be less efficient than stocks due to higher agency costs. Only minor variations are found when comparing different frontier efficiency methodologies (data envelopment analysis, stochastic frontier analysis).
Für eine erfolgreiche wertorientierte Steuerung innerhalb einer Versicherungsgruppe ist eine Einheitlichkeit und Überleitbarkeit von MCEV, Solvency II und IFRS von zentraler Bedeutung - allein, um den damit verbundenen Aufwand auf ein sinnvolles Mass zu begrenzen. Widersprüchliche Aussagen der verschiedenen Prinzipien können problematisch sein, wenn das Management die Signale in ihre Entscheidungsfindung einbinden möchte.
The purpose of this paper is to review research on lapse in life insurance and to outline potential new areas of research in this field. Design/methodology/approach - The authors consider theoretical lapse rate models as well as empirical research on life insurance lapse and provide a classification of these two streams of research. More than 50 theoretical and empirical papers from this important field of research are reviewed. Challenges for lapse rate modeling, lapse risk mitigation techniques, and possible trends in future lapse behavior are discussed. Findings - Lapse rate modeling has been a very active field of research in the last years, as evidenced by the 44 papers on lapse modeling considered in this review. Moreover, a fair amount of empirical work (another 12 papers) has been done, especially on the issue of how environmental variables affect lapse. Research on individual policyholder and contract information is more scarce, since such information is typically treated as confidential. Practical implications - The risks arising from lapse are of high economic importance. Lapsation is thus of interest not only to academics, but is highly relevant for the industry, regulators, and policymakers, especially in regard to designing an appropriate regulatory environment. Lapsation also impacts many actuarial tasks, such as product design, pricing, hedging, and risk management. A review of the recent literature might be helpful for these tasks. Originality/value - To the best of the authors' knowledge, this is the first structured review of the increasingly important literature on life insurance lapsation. Next to the structured review of the existing models and the empirical evidence, the paper also contributes to the literature by discussing challenges for lapse rate modeling and possible trends.
