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The strategic role of reinsurance in the United Kingdom’s (UK) non-life insurance market

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  • Upreti, Vineet
  • Adams, Mike

Abstract

Using panel data for five main lines of insurance in the United Kingdom’s (UK) non-life insurance market we demonstrate that by increasing the level of reinsurance, primary insurers increase their product-market share at the expense of less reinsured rivals. We also observe that the influence of reinsurance and other financial variables on insurers’ growth in product-market share differs across lines of insurance business. We conclude that reinsurance performs an important strategic function in insurance markets through its impact on product-market outcomes in competitive insurance markets. Additionally, we find that leverage is the most important factor affecting product-market share at the aggregate business level of the insurance firm.

Suggested Citation

  • Upreti, Vineet & Adams, Mike, 2015. "The strategic role of reinsurance in the United Kingdom’s (UK) non-life insurance market," Journal of Banking & Finance, Elsevier, vol. 61(C), pages 206-219.
    • Handle: RePEc:eee:jbfina:v:61:y:2015:i:c:p:206-219
    DOI: 10.1016/j.jbankfin.2015.09.010
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    Cited by:

    1. Caporale, Guglielmo Maria & Cerrato, Mario & Zhang, Xuan, 2017. "Analysing the determinants of insolvency risk for general insurance firms in the UK," Journal of Banking & Finance, Elsevier, vol. 84(C), pages 107-122.
    2. Biener, Christian & Eling, Martin & Jia, Ruo, 2016. "The Roles of Industry Idiosyncrasy, Cost Efficiency, and Risk in Internationalization: Evidence from the Insurance Industry," Working Papers on Finance 1602, University of St. Gallen, School of Finance.
    3. Mike Adams & Wei Jiang & Tianshu Ma, 2024. "CEO power, corporate risk management, and dividends: disentangling CEO managerial ability from entrenchment," Review of Quantitative Finance and Accounting, Springer, vol. 62(2), pages 683-717, February.
    4. Mario Cerrato & Paolo Coccorese & Xuan Zhang, 2020. "The Informational Content of Default Risk in UK Insurance Firms," Working Papers 2020_06, Business School - Economics, University of Glasgow.
    5. Nicos Scordis, 2020. "A note on risk and value from an underutilized dataset: Consolidated disclosures," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 23(1), pages 105-112, March.
    6. Biener, Christian & Eling, Martin & Jia, Ruo, 2017. "The structure of the global reinsurance market: An analysis of efficiency, scale, and scope," Journal of Banking & Finance, Elsevier, vol. 77(C), pages 213-229.
    7. Guglielmo Maria Caporale & Mario Cerrato & Xuan Zhang, 2016. "Analysing the Determinants of Credit Risk for General Insurance Firms in the UK," CESifo Working Paper Series 5971, CESifo.
    8. Ignacio Moreno & Purificación Parrado‐Martínez & Antonio Trujillo‐Ponce, 2020. "Economic crisis and determinants of solvency in the insurance sector: new evidence from Spain," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(3), pages 2965-2994, September.
    9. Vincent Y. Chang, 2019. "Does reinsurance purchasing enhance insurers’ competitiveness? Evidence from the U.S. property–liability insurance industry," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 44(4), pages 595-623, October.

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    More about this item

    Keywords

    Reinsurance; Insurance; Strategy; United Kingdom;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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