Failure Risks in the Insurance Industry: A Quantitative Systems Analysis

We present in this article the findings from a study on insolvency in the property–casualty insurance industry that was commissioned by the Risk Foundation. The Risk Foundation contacted us for this work to draw from our experience in risk analysis based on systems analysis and probability. Therefor...

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Bibliographic Details
Published in:Risk management and insurance review 2009-09, Vol.12 (2), p.199-212
Main Authors: Paté-Cornell, Elisabeth, Deleris, Léa A.
Format: Article
Language:English
Subjects:
Failure
Financial analysis
Insolvency
Insurance companies
Insurance industry
International finance
Life expectancy
Management decisions
Probability
Property & casualty insurance
Risk management
Statistical analysis
Studies
Systems analysis
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Summary:We present in this article the findings from a study on insolvency in the property–casualty insurance industry that was commissioned by the Risk Foundation. The Risk Foundation contacted us for this work to draw from our experience in risk analysis based on systems analysis and probability. Therefore, we provide a different perspective on failure in the insurance industry by opening the “black box” to assess the contribution of different factors to the overall risk. Besides the development of a quantitative model for insolvency risk, our study for the Risk Foundation included insights from (1) unstructured interviews with 15 insurance industry experts and with six insurance regulators in different states, and (2) a statistical analysis of insolvency data (A.M. Best) covering the 1970 through 2005 period. Our focus here is centered on the practical insights that came out of the study, rather than on the technical details that led us to those insights.
ISSN:1098-1616
1540-6296
DOI:10.1111/j.1540-6296.2009.01162.x