Abstract
This research analyzes the performance of the Risk-Based Capital (RBC) ratio and other variables in predicting insolvencies in the property-liability insurance industry during the period 1994 to 2008. This research contributes to the literature by analyzing a longer period of time than previous research, testing timely variables such as exposure to hurricane prone areas and testing the role of macroeconomic and industry-wide variables in property-liability insurer insolvencies. The results indicate that the accuracy of the RBC ratio in predicting insolvencies is inconsistent over time and that some previously tested financial ratios that are part of the Financial Analysis Solvency Tools system do not always reliably predict insurer insolvency. In addition, the insolvency propensity is found to be significantly related to an insurer’s hurricane prone area exposure, changes in interest rates, the industry-wide combined ratio, and the industry-wide Herfindahl index of premiums written.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
