Discussion Papers 1591, 39 S.
Guglielmo Maria Caporale, Mario Cerrato, Xuan Zhang
2016
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This paper estimates a reduced-form model to assess the credit risk of General Insurance (GI) non-life firms in the UK. Compared to earlier studies, it uses a much larger sample including 30 years of data for 515 firms, and also considers a much wider set of possible determinants of credit risk. The empirical results suggest that macroeconomic and firm-specific factors both play important roles. Other key findings are the following: credit risk varies across firms depending on their business lines; there is default clustering in the GIindustry; different reinsurance levels also affect the credit risk of insurance firms. The implications of these findings for regulators of GI firms under the coming Solvency II are discussed.
Topics: Financial markets
JEL-Classification: G22;C58
Keywords: Insolvent, Doubly Stochastic, Insurance, Reinsurance
Frei zugängliche Version: (econstor)
http://hdl.handle.net/10419/142795