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Insurance and Issues in Financial Soundness

Author

Listed:
  • Udaibir S Das
  • Richard Podpiera
  • Nigel Davies

Abstract

This paper explores insurance as a source of financial system vulnerability. It provides a brief overview of the insurance industry and reviews the risks it faces, as well as several recent failures of insurance companies that had systemic implications. Assimilation of banking-type activities by life insurers appears to be the key systemic vulnerability. Building on this experience and the experience gained under the FSAP, the paper proposes key indicators that should be compiled and used for surveillance of financial soundness of insurance companies and the insurance sector as a whole.

Suggested Citation

  • Udaibir S Das & Richard Podpiera & Nigel Davies, 2003. "Insurance and Issues in Financial Soundness," IMF Working Papers 03/138, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:03/138
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    References listed on IDEAS

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    1. Yehning Chen, 1999. "Banking Panics: The Role of the First-Come, First-Served Rule and Information Externalities," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 946-968, October.
    2. Robert G. King & Ross Levine, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 717-737.
    3. Odedokun, M. O., 1996. "Alternative econometric approaches for analysing the role of the financial sector in economic growth: Time-series evidence from LDCs," Journal of Development Economics, Elsevier, vol. 50(1), pages 119-146, June.
    4. J. David Cummins & Martin F. Grace & Richard D. Phillips, 1998. "Regulatory solvency prediction in property-liability insurance: risk-based capital, audit ratios, and cash flow simulation," Working Papers 98-20, Federal Reserve Bank of Philadelphia.
    5. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
    6. International Monetary Fund, 2002. "Financial Soundness Indicators; Analytical Aspects and Country Practices," IMF Occasional Papers 212, International Monetary Fund.
    7. S R Diacon & K Starkey & C O'Brien, 2002. "Size and Efficiency in European Long–term Insurance Companies: An International Comparison," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 27(3), pages 444-466, July.
    8. Kenneth H Kang & Hong Liang & Henry Ma & Anthony J. Richards & Ajai Chopra & Meral Karasulu, 2001. "From Crisis to Recovery in Korea; Strategy, Achievements, and Lessons," IMF Working Papers 01/154, International Monetary Fund.
    9. Rudolf Enz, 2000. "The S-Curve Relation Between Per-Capita Income and Insurance Penetration," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 25(3), pages 396-406, July.
    10. Gilles Benoist, 2002. "Bancassurance: The New Challenges," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 27(3), pages 295-303, July.
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    Citations

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    Cited by:

    1. Peter Haiss & Kjell Sümegi, 2008. "The relationship between insurance and economic growth in Europe: a theoretical and empirical analysis," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 35(4), pages 405-431, September.
    2. repec:eee:jbfina:v:84:y:2017:i:c:p:107-122 is not listed on IDEAS
    3. Lee, Chien-Chiang & Lin, Chun-Wei & Zeng, Jhih-Hong, 2016. "Financial liberalization, insurance market, and the likelihood of financial crises," Journal of International Money and Finance, Elsevier, vol. 62(C), pages 25-51.
    4. S. Nuri Erbas & Chera L. Sayers, 2006. "Institutional Quality, Knightian Uncertainty, and Insurability; A Cross-Country Analysis," IMF Working Papers 06/179, International Monetary Fund.
    5. Cummins, J. David & Rubio-Misas, María & Vencappa, Dev, 2017. "Competition, efficiency and soundness in European life insurance markets," Journal of Financial Stability, Elsevier, vol. 28(C), pages 66-78.
    6. Nikolina Smajla, 2014. "Measuring Financial Soundness Of Insurance Companies By Using Caramels Model – Case Of Croatia," Interdisciplinary Management Research, Josip Juraj Strossmayer University of Osijek, Faculty of Economics, Croatia, vol. 10, pages 600-609.
    7. J. François Outreville, 2011. "The relationship between insurance growth and economic development - 80 empirical papers for a review of the literature," ICER Working Papers 12-2011, ICER - International Centre for Economic Research.
    8. Pasiouras, Fotios & Gaganis, Chrysovalantis, 2013. "Regulations and soundness of insurance firms: International evidence," Journal of Business Research, Elsevier, vol. 66(5), pages 632-642.
    9. Udaibir S Das & Marc G Quintyn & Kina Chenard, 2004. "Does Regulatory Governance Matter for Financial System Stability? An Empirical Analysis," IMF Working Papers 04/89, International Monetary Fund.
    10. Gaganis, Chrysovalantis & Liu, Liuling & Pasiouras, Fotios, 2015. "Regulations, profitability, and risk-adjusted returns of European insurers: An empirical investigation," Journal of Financial Stability, Elsevier, vol. 18(C), pages 55-77.

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