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Are non-risk based capital requirements for insurance companies binding?

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  • Leo de Haan
  • Jan Kakes

Abstract

We investigate the capital structure of 350 Dutch insurers during the period 1995-2005. Our main findings are: (1) a small company size, a mutual organisation, high profitability, large equity investments, and being a fire insurer, all contribute to higher solvency margins; (2) minimum solvency requirements from the supervisor are less easy to explain by firm characteristics and do not correlate positively with risk; (3) neither do insurers follow solvency requirements closely; (4) most insurers have surplus capital which, together with a large company size and high profitability, reduces the risk of insolvency.

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Bibliographic Info

Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 145.

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Date of creation: Aug 2007
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Handle: RePEc:dnb:dnbwpp:145

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Keywords: Insurance companies; Capital structure; Solvency requirements;

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Citations

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Cited by:
  1. Irene Albarrán & J. Miguel Marín & Pablo J. Alonso, 2011. "Why using a general model in Solvency II is not a good idea : an explanation from a Bayesian point of view," Statistics and Econometrics Working Papers ws113729, Universidad Carlos III, Departamento de Estadística y Econometría.
  2. Hakenes, Hendrik & Schnabel, Isabel, 2006. "Bank Size and Risk-Taking under Basel II," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 88, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  3. Hagendorff, Bjoern & Hagendorff, Jens & Keasey, Kevin & Gonzalez, Angelica, 2014. "The risk implications of insurance securitization: The case of catastrophe bonds," Journal of Corporate Finance, Elsevier, vol. 25(C), pages 387-402.
  4. Leo de Haan & Jan Kakes, 2010. "Momentum or Contrarian Investment Strategies:Evidence from Dutch institutional investors," DNB Working Papers 242, Netherlands Central Bank, Research Department.
  5. Pasiouras, Fotios & Gaganis, Chrysovalantis, 2013. "Regulations and soundness of insurance firms: International evidence," Journal of Business Research, Elsevier, vol. 66(5), pages 632-642.
  6. Selim Mankaï & Aymen Belgacem, 2013. "Interactions Between Risk-Taking, Capital, and Reinsurance for Property-Liability Insurance Firms," EconomiX Working Papers 2013-23, University of Paris West - Nanterre la Défense, EconomiX.
  7. Fier, Stephen G. & McCullough, Kathleen A. & Carson, James M., 2013. "Internal capital markets and the partial adjustment of leverage," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 1029-1039.
  8. Bjoern Hagendorff & Jens Hagendorff & Kevin Keasey, 2013. "The Shareholder Wealth Effects of Insurance Securitization: Preliminary Evidence from the Catastrophe Bond Market," Journal of Financial Services Research, Springer, vol. 44(3), pages 281-301, December.

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