Benchmarking Indian General Insurance Firms

Benchmarking: An International Journal
Benchmarking Indian general insurance firms

Samir K. Srivastava Avishek Ray
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BIJ
20,1 Benchmarking Indian general
insurance firms
Samir K. Srivastava
4 Indian Institute of Management, Lucknow, India, and
Avishek Ray
Received 24 May 2011 Deloitte Consulting, Hyderabad, India
Revised 26 July 2011
Accepted 27 July 2011
Abstract
Purpose – The purpose of this paper is to benchmark the solvency status of Indian general insurance
firms.
Design/methodology/approach – The paper collects, compiles and analyses the key financial,
operational and business data of eight Indian insurance firms. The authors first decide on initial
firm-specific economic variables and use data of last five years from IRDA Reports and Company
Annual Reports. The NAIC IRIS ratios method was used to obtain an initial risk classification. This was
used as a proxy of insolvency risk. Linear regression and logit techniques were thereafter applied to
estimate the significant factors (direction-wise and magnitude-wise) which influence insurer solvency.
Findings – The results suggest that the factors that most significantly influence Indian non-life
insurers are lines of business, the firm’s market share, the premium growth rate, the underwriting
performance and the claims incurred. Further, the factors which have the strongest effect are market
share, change in inflation rate, firm size, lines of business and claims incurred.
Research limitations/implications – The sample of Indian general insurers used is limited with
regard to the time span. No holdout sample was used and the entire data set was subjected to
statistical analysis. These somewhat limit the findings and implications.
Practical implications – The paper provides insurers with easy-to-use operational and marketing
indicators to benchmark their solvency risk. It will lead to competitive goal setting for continuous
improvement. Estimation of appropriate market/economic parameters can be a useful input for
regulators. A few suggested indicators are new.
Originality/value – Previous studies of insurance companies have focused on developed economies
(USA, Europe) or the Asian Markets (China and Japan). This paper determines a set of marketing,
financial and operational variables to predict benchmark financial strength of general insurance firms
in India. It incorporates qualitative inputs from practising managers and industry experts before
carrying out quantitative modeling and analysis.
Keywords Benchmarking, Solvency risk, General insurance, India
Paper type Research paper
1. Introduction
The insurance sector throughout the world is going through a dynamic environment
where efficiency and competitiveness hold the key to survival. The Indian insurance
market is the fifth largest in Asia in terms of total premium after Japan, Korea, China,
and Taiwan. Although India has the second largest population in the world, it has one
Benchmarking: An International
Journal
Vol. 20 No. 1, 2013 The authors thank the managers of four of the eight sample firms for informal discussions and
pp. 4-24 interviews. The authors especially thank Mr Gagan Singla, Manager, Deloitte Consulting for the
q Emerald Group Publishing Limited
1463-5771
expert opinion that they solicited from him from time to time. This work would not have been
DOI 10.1108/14635771311299461 possible without their co-operation and sharing of experiences, vision, and expertise.
of the lowest penetration rates for property and casualty insurance in Asia (measured General
by premium as a percentage of GDP). Hence India is referred to as a high potential, low insurance firms
penetration insurance market. With increasing liberalization and foreign participation,
the risk of insolvency among Indian insurance firms has gone up substantially. So,
there is a strong need of developing a framework for predicting insolvency risks in this
sector.
Insurance products are broadly divided into life and non-life categories. The range of 5
products in the Indian life insurance sector can be broadly grouped under group
insurance products, and individual insurance products. The group insurance products
consist of endowments, term insurance, annuities, and life insurance products.
Individual insurance products consist of unit linked insurance plans (ULIPS), pension
funds, and guaranteed life products. The Indian non-life insurance consists of two broad
sectors – the accident and health insurance sector, and the property and casualty
insurance sector. These are further segmented into auto, health, fire, marine, engineering
and others. In terms of gross premium incomes, property and casualty accounts for
86.7 percent of the market’s total value while accident and health accounts for the
remaining 13.3 percent. The auto insurance segment had the largest market share in
2009-2010 while health segment recorded a growth of 21.12 percent in the same time
period.
The total premium of the insurance industry in 2008-2009 was US$52.6 billion,
a 24.6 percent compounded annual growth from 2002-2003. The number of insurance
players has increased from four and eight in the life and non-life sectors in 2000 to
23 and 24, respectively, in 2010. The sector has witnessed entry of a number of global
insurers. Most of the private insurers are joint ventures with established foreign
companies worldwide. The market structure of the Indian insurance industry along with
its characteristics is shown in Figure 1. The major players are LIC (largest life insurer),
SBI Life (first private insurer to report profits), ICICI Prudential (largest private life
insurer), Kotak Mahindra, Met Life, and Shriram.
Ministry of Finance
(Government of India)
Insurance Regulatory and

Development Authority (IRDA)
Life Insurance General Insurance

(23) (24)
Public Private Public Private

(1) (22) (6) (18)
Life Insurance Corporation Their entry has Aggressive growth Outperform

(LIC) is the only player with diversified the strategy using strong public sector in Figure 1.
about 70% market share product portfolio distribution network service quality Market structure of the
Indian insurance industry
Source: IRDA Annual Report (2009-2010, as on 31 August 2010)
BIJ Key regulators in insurance
20,1 The insurance industry is subject to government regulations to safeguard the interests
of the policyholders (Kramer, 1996). The National Association of Insurance
Commissioners (NAIC) was setup in the US in 1871 with the goal of coordinating
the regulation of insurers operating in multiple jurisdictions. It provides assistance to
state regulators in maintaining the financial stability and conducting market regulation
6 of the insurance industry. One of the first significant steps by the NAIC in regulating the
financial stability of the insurance industry was to develop “uniform financial reporting”
norms for all insurers. The NAIC employed three systems for determining insurers in
need of regulatory action. The Insurance Regulatory Information System (IRIS) has
served as the basic method for checking solvency for state regulators and NAIC from the
mid 1970s onwards. It was succeeded by the Financial Analysis and Tracking System
(FAST) system in 1993 and the property-liability insurance risk based capital (RBC)
system in 1994. Similarly, other governments have established the insurance
supervisory boards to protect the interests of the policyholders.
In Indian context, the Insurance Regulatory and Development Authority (IRDA)
was formed through the IRDA Act, 1999 as a regulatory body tasked with governing the
Indian insurance industry. For ensuring financial stability it reviews investment
guidelines (prescribing the way in which funds can be invested), monitors the investment
portfolio of insurers on a quarterly basis, and assesses whether the prescribed solvency
norms are being followed by insurers. To ensure transparency, the IRDA has laid out
specific accounting norms and data formats for submission of data for regulatory and
other purposes. Every insurance firm/company is required to maintain solvency margins
based on its volume of business and as per the guidelines stipulated by the IRDA.
2. Literature review
We review the literature to gain an insight of the relevance and scope of the benchmarking
concept in Indian insurnace sector. We summarise the extant literature on the concept of
solvency and variables affecting solvency. Relevant benchmarking applications in
insurance context are discussed next. Finally, some research issues and gaps which need
attention are highlighted. The present work tries to address some of these.
Concept of solvency for an insurance firm

The solvency of an insurance firm corresponds to its ability to pay its claims. An insurer is
insolvent if its assets are inadequate (compared to its indebtedness) or cannot be disposed
of in time to (illiquidity) to pay the arising claims (Kansal, 2004). Solvency margin is the
amount by which the assets of an insurer exceed its liabilities. Solvency is predominantly
dependent upon the quantity of technical reserves which the insurer has setup for its
obligations and the kind of capital adequacy which the insurer maintains as security. The
solvency of an insurance firm is often used as a proxy for its financial stability/strength.
Previous studies of insolvency have focused on life and general insures in the US and other
developed economies. Chen and Wong (2004) discuss various firm-specific,
macro-economic indicators of financial stability for Asian insurance companies.
Various early warning systems for insolvency have been developed. IRIS began as
the first early warning system in 1970s. It consists of two phases:
(1) The statistical phase.
(2) The analytical phase.
The statistical phase involves calculating 12 financial ratios for an insurer and then General
comparing each ratio to its specified “normal range”. These ratios cover the following insurance firms
four dimensions of an insurer’s financial condition:
(1) Overall financial condition.
(2) Profitability ratios.
(3) Liquidity ratios. 7
(4) Reserve ratios.
The analytical phase involves selecting insurers for a detailed assessment of their financial
results based on several criteria, including whether an insurer has four or more ratios
outside the “normal range”. Following this analysis, each insurer is placed in one of five
categories – first, second, third, no priority and no synopsis required (Grace et al., 1998).
The original IRIS system was expanded into the FAST system. FAST ratios provide a sum
total score for an insurer based on the number of points assigned according to set
parameters for each of its 29 financial ratios. Higher scores indicate higher risk of future
insolvency. FAST scores were designed to provide insurance departments with a common
approach to analyse and screen the financial stability of insurance companies. However,
the FAST ratios are non-public, are used only by the NAIC regulators, and are based on a
subjective evaluation of the importance of the ratios and their relationship to solvency.
RBC system provides a capital adequacy standard which:
.
is related to risk;
.
increases the available safety net for insurers;
.
applies uniformly among all states; and
.
allows regulatory action when the capital falls below the prescribed standard norms.
The property-liability RBC formula focuses on the following aspects of an insurer’s

financial conditions: asset risk (default and market value declines); underwriting risk
(pricing and reserve errors); credit risk (uncollectible reinsurance and other receivables)
and off balance sheet risk (e.g. excessive growth, parent obligation guarantees, etc.). For
each type of risk, the RBC formula applies various weights to variables derived from the
annual statements of insurers. Thus, the RBC charges for each type of risk are determined.
To account for the diversification among the major risk categories, a final covariance
adjustment is made to the summed RBC charges (Chen and Wong, 2004; Grace et al., 1998).
Major variables affecting solvency of an insurance firm

The variables affecting insurers’ solvency was summarized by McDonald (1992) but they
were not classified based on the insurer type. Subsequent literature suggests that the
factors affecting life insurance firms differ significantly from those affecting general and
health insurance firms since life insurance companies differ a lot in terms of operations,
liability duration, investment activities, and vulnerabilities (Brockett et al., 1994).
The factors which are significant for predicting a general insurer’s insolvency are:
.
Growth rate of surplus. A profitable insurer exhibits healthy year-on-year
increases in surplus. However, very large increases in surplus might signal
financial imprudence and could increase the level of operational risk (Lee and
Urrutia, 1996).
BIJ .
Premium growth. This is a measure of market potential. Excessive focus on
20,1 growth (characterized by rapid premium volume increases) can be a signal of
insolvency according to empirical studies (Kim et al., 1995).
.
Operating margin. It is the ratio of net operating income to premiums earned.
Logically, any profitable insurer must be earning more than it spends. Kramer
(1996) found that the operating margin has a negative co-relation with insurer
8 insolvency.
.
Liquidity ratio. An insurer’s cash flows and current assets are the two primary
sources of liquidity. Lee and Urrutia (1996) found that the liquidity ratio
significantly affects insurer insolvency.
.
Underwriting performance. Underwriting income forms a key element of any
insurer’s operating income. It is measured using the combined ratio (ratio of
incurred losses to earned premium plus incurred expenses to written premium).

Browne and Hoyt (1995) found that the combined ratio is positively co-related to
the insolvency rate.
.
Investment performance. This is the next key component of insurer’s operating
income. Kramer (1996) found that investment performance (measure through
investment yield ratio) was negatively co-related to insurers’ insolvency.
.
Firm size. This is measured based on total assets and total premium. Since large
insurance firms are less likely to be liquidated by regulators, it is expected that
firm size would be negatively co-related to insurers’ insolvency (BarNiv and
Hershbarger, 1990).
Similarly, the factors which are significant for predicting a life insurer’s insolvency are:
.
Firm size, investment performance, and operating margin. Kim et al. (1995) and
Grace et al. (1998) found that firm size and age are negatively correlated with
insurers’ insolvencies.
.
Insurance leverage. It is measured as the ratio of reserves to surplus. Carson and
Hoyt (1995) found that increasing insurance leverage may increase the financial
risk of an insurer.
.
Change in product mix. It is defined as the average change in percentage of
total annual premium obtained from each product line. BarNiv and
Hershbarger (1990) found that change in the product mix affects smaller life
insurers adversely.
.
Change in asset mix. It is defined as the average percentage change in all asset
categories (e.g. bonds, common and preferred stocks, mortgage loans, policy
loans, etc.). BarNiv and Hershbarger (1990) confirm that there is a positive
relationship between life insurers’ insolvency and this variable.
Relevant benchmarking applications in insurance context

Benchmarking can be described as a framework within which indicators and best
practices are examined in order to determine potential areas of improvement for a firm
(Tavana et al., 2009). It allows for competitive goal setting for continuous improvement
(Amin and Banerjee, 2010). BarNiv and Raveh (1989) reviewed the methodological
issues and analysed a nonparametric qualitative response model as well as
a generalized qualitative response model in context of financial distress in the General
insurance industry. A.M. Best Company Inc. (1992) carried out a univariate analysis insurance firms
and found that the number of insolvencies is positively correlated with life insurer’s
insolvency. Delpachitra (2008) provides some cost benchmarks for the cost of
processing an insurance application and processing a claim. A related work by
Wei-Shong and Kuo-Chung (2006) establishes the internal performance measures to
monitor and enhance the operational qualities of the employees in bank. 9
BarNiv and McDonald (1992) have done a through literature review of various
statistical techniques and the results of using such techniques for assessing the
financial stability (insolvency risk) of insurers. Approaches and techniques such as
univariate analysis (A.M. Best Company Inc., 1992; Cummins et al., 1995), multiple
discriminant analysis (Carson and Hoyt, 1995), neural network (Duett and
Hershbarger, 1990; Brockett et al., 1994), nonparametric discriminant (BarNiv and

Raveh, 1989), recursive partitioning (Carson and Hoyt, 1995), logit and probit analyses
(BarNiv and Hershbarger, 1990; Carson and Hoyt, 1995; Cummins et al., 1995; Lee
and Urrutia, 1996), cascaded logit regressions (Baranoff et al., 1999), expected
policyholder deficit ratio approach (Barth, 2000), ruin approcah (Barth, 2000) and
cash flow simulation (Cummins et al., 1999) are found in extant literature. Most
techniques have divided the list of available insurers into an analysis sample and a
holdout sample.
Browne and Hoyt (1995) tested the relationship of six variables, viz. number of
insurers (competition), unanticipated inflation, interest rate change and absolute level
of interest rate. All variables were tested for positive co-relation with insurers’
insolvencies. Kramer (1996) used an ordinal extension of the standard (binary) logit
model evaluation of non-life insurance Dutch companies. He used a stepwise selection
procedure to determine the variables to be included in the model. He found that seven
variables significantly contribute to the determination of the financial solidity covering
solvency aspects. Lee and Urrutia (1996) found that combined use of logit and hazard
models provides a more complete analysis of the insurance insolvency problem.
Dawkins et al. (2007) provide a framework for benchmarking firm performance
(profitability) using panel data. They produce a ranking of “firm efficiencies”. Debnath
and Shankar (2008) model and evaluate the efficiency of 50 Indian banks using data
envelopment analysis (DEA).
Research issues and gaps

Previous studies of insurance companies have focused on developed economies
(USA, Europe) or the Asian markets (China and Japan). They focus primarily on
financial and macro-economic variables. Similar studies need to be carried out in other
countries, particulary the developing economies where the context may be different.
Since many financial variables related data may still be not available in these countries,
finding appropriate operational and marketing variables that can be used as a surrogate
for predicting future insurer insolvencies in these contexts can be useful as regulatory
action depends on, and is influenced by, the prevailing economic environment. We also
did not come across any study which takes qualitative inputs from practising managers
and industry experts on key parameters and decision variables. Actually, a good holistic
practical model should incorporate these before carrying out quantitaive modeling and
analysis.
BIJ 3. Methodology
20,1 The objective of this paper is to benchmark the solvency status of Indian general
insurance firms. We study eight private general insurance companies using firm data
and macro data separately. For this, we determine a set of firm-specific marketing,
financial and operational variables which can be used to predict their financial
strength. We use inputs and opinions of a few managers and industry experts to make
10 them context-specific. Unstructured interviews were conducted with managers of four
firms at several points in time. Data of last five years of the eight selected firms was
drawn from Annual Reports of IRDA, Company Annual Reports and Company Public
Disclosures. Inflation rate change data was taken from Indiastat.com database
(Indiastat.com, 2010). The IRIS ratios method was used to obtain an initial risk
classification of these Indian insurance firms. Linear regression and logit techniques
were thereafter applied to estimate the significant factors (direction-wise and

magnitude-wise) that influence solvency of these firms (IRIS Ratio, 2011). Our detailed
methodology is shown in Figure 2.
Study of various insurance regulatory mechanisms and financial indicators relevant
to insurance sector was carried out first and has been discussed in earlier sections.
Study various insurance regulatory mechanisms (Worldwide and India)

Study financial indicators relevant to insurance (IRIS, FAST, RBC)
Sources: IRDA (India), NAIC (US), FSA (UK), APRA (Australia) and
secondary published data
Decide sub-set of insurance firms for benchmarking study

Sources: Published literature, secondary sources and expert opinions
Calculate selected ratios for select general insurance firms and classify them
Sources: Secondary data in IRDA reports, company annual reports and secondary sources
Decide firm specific economic variables for insurance firm benchmarking

Sources: Company annual reports, IRDA reports, published literatureand expert opinions
Select and use appropriate statistical tools and techniques

Sources: Data analysis techniques and software (MS Excel, SAS Enterprise Miner)
Figure 2.
Methodology adopted
in the study Analyse the statistical outputs to predict insurer insolvency risk
A major decision in our methodology was about selection of the sector and firms for General
benchmarking within insurance. We found the following about the life insurance sector: insurance firms
.
Unavailability of IRIS cut-offs for life ratios. The cut-off values for IRIS life ratios
are either not clearly defined (e.g. change in product mix, change in asset mix) or
missing (e.g. commission and expenses to premium and deposits ratio).
.
Missing data for calculating life ratios. Several IRIS life ratios (e.g. non-admitted
to admitted assets ratio) involve financial variables (e.g. non-admitted assets) 11
which are standard as per US GAAP reporting but are not present in Indian
insurance companies’ annual reports.
.
Unavailability of life ratio calculation formulae. The calculation steps/formulae
for certain life ratios are not available publicly or involve paid information
access. (e.g. change in reserving ratio, affiliated investments to capital and
surplus, etc.).
We therefore used the following criteria to select the Indian insurers:

.
must be a general insurance firm (due to limitations described above and to
exclude specialised insurers and standalone health insurers);
.
must be a private insurer (as public sector non-life insurance firms are a distinct
category); and
.
must be established in the industry (i.e. operational for more than five years – to
ensure sufficient longitudinal data for analysis).
The initial list of companies was drawn from the IRDA Annual Report 2009-2010.
It specifies 24 general insurers as having been granted registration for conducting
non-life business in India. Of these six were in the public sector and the remaining
18 were in the private sector. Based on the criteria mentioned earlier, only eight general
insurers qualified for the purpose of the study and these along with their starting year
of operations are shown in Table I.
To determine the critical firm-specific factors to predict insurer financial health, an
initial exercise involving classification of Indian insures based on established financial
variables for solvency risk was required. The IRIS ratios were used for this purpose due to
their well-documented calculation steps, simplicity of use and prior use in research. They
were selected over competing methods (RBC, FAST) due to the following advantages:
.
IRIS Ratios are one of the oldest, most well researched systems for measuring
financial strength as a possible indicator of future solvency for insurance companies.
S. no. Name of general insurance firm Operational from year
1 Royal Sundaram 2001

2 Bajaj Allianz 2001
3 TATA AIG 2001
4 Reliance 2000
5 IIFCO-TOKIO 2000
6 ICICI Lombard 2001 Table I.
7 Cholamandalam MS 2001 Indian general insurance
8 HDFC Ergo 2002 firms used in the study
BIJ .
Many researches (Grace et al., 1998; Chen and Wong, 2004) have previously used
20,1 the IRIS Ratios to identify and prioritise insurers for further regulatory scrutiny.
.
The definition, variables, and calculations involved (as per American GAAP) for
each of the life and property/casualty IRIS Ratios are well documented. The same
cannot be said for FAST or RBC analysis.
. The IRIS Ratio scores are publicly available.
12
Based on the above, we identified seven P/C IRIS Ratios for which data was available.
These ratios along with their formulae, usual ranges, and data sources are summarised
in Table II. The first three ratios measure the overall financial condition of the firm.
The next three ratios measure the profitability of the firm. The last ratio measures the
liquidity of the firm.
Next step was to decide the firm-specific variables for benchmarking. The list of such
predictor variables has been compiled from literature and industry expert’s inputs. Prior
research has found several firm-specific and macroeconomic variables to be significant
predictors of insolvency. As per industry experts, market share, number of years in
operations, lines of business, incurred claims and commission and expenses of
management too may have significant influence on insurers’ insolvency. The
macroeconomic as well as firm-specific variables along with their mathematical
interpretation and data source for the present study are described in Table III.
Selection of appropraiate analysis technique and tool

We considered multiple regression, logit regression, cluster analysis, and neural
network techniques. Their pros and cons were analysed as shown in Table IV.
Usual
rangea
S.no. IRIS ratio Formulae (%) Data source
Gross Premiums Written
1 Gross premium #900 IRDA
to surplus Policyholders Surplus Reports
Net Premiums Written
2 Net premium to #300 IRDA
surplus Policyholders Surplus Reports
Change in Net Writings
3 Change in net $ 2 33 IRDA
writings Net Premiums Written Prior Yr and # 33 Reports
4 Two-year overall 2 Year Loss Ratio þ 2 Year Expense Ratio #100 IRDA
operating ratio Net Investment income Reports
5 Investment yield $ 3.0 and Company
Avg: Cash & Invstd: Assets ðCur: Prior YrÞ # 10.0 Annual
Reports
Change in Policyholders Surplus
6 Gross change in $ 2 10 IRDA
surplus Adjstd: Policyholders Surplus ðCur: Prior YrÞ and # 50 Reports
Liabilities
7 Liabilities to #105 IRDA
Table II. liquid assets Liquid Assets Reports
Selected seven
P/C IRIS ratios Source: awww.statesrrg.com/iris.html
General
Mathematical
Variable Reference(s) interpretation Data source insurance firms
Macro-economic
Number of insurers Browne and Hoyt Total no. of competing IRDA Annual Report
(1995) insurers in the industry
Insurance density Expert opinion Number of insurance IRDA Annual Reports 13
policies/1,000 people
Average interest rate Browne and Hoyt Avearge quarterly prime RBI Annual Report:
(1995) lending rate (PLR) Appendix Table 41
Inflation rate change Browne and Hoyt Yearly change in inflation Indiastat.com
(1995) based on WPI
Firm specific
No. of years in Expert opinion Number of years in actual IRDA Annual Report
operation business in India
Investment yield ratio Sen (2008) Investment income/avg Financial Statements:
invested assets IRDA Annual Report
Investment income Hampton (1993) Investment income/ Financial Statements:
ratio premiums earned IRDA Annual Report
Size of insurer (1) Cummins et al. Total assets of the firm Financial Statements:
(1995) IRDA Annual Report
Size of insurer (2) Cummins et al. Total gross premium Financial Statements:
(1995) earned by the firm IRDA Annual Report
Operating margin Kramer (1996) Net operating income/ Financial Statements:
premium earned IRDA Annual Report
Premium growth rate Kim et al. (1995) Percent premium growth Financial Statements:
between time periods IRDA Annual Report
Liquidity ratio Hampton (1993); Lee Liquid assets/total Financial Statements:
and Urrutia (1996) reserves IRDA Annual Report
Lines of business Expert opinion Number of lines of Form NL 38 of insurer’s
business mandatory public
disclosures
Underwriting Browne and Hoyt (Losses/earned Form NL 30 of insurer’s
performance (1995) premium) þ (Expenses/ mandatory public
(combined ratio) written premium) disclosures
Incurred claims Expert opinion Total value of claims Financial Statements
incurred in current year IRDA Annual Report
Commission and Expert opinion Annual spend on Statement 31 of IRDA Table III.
expenses of commission and expenses Annual Reports Predictor variables for
management of management insurance firm
Market share Expert opinion Firm’s gross premiums’ Table 18 of IRDA Annual benchmarking used in
percentage market share Reports the study
Given the objective of the study and data availability, linear regression and logit were
selected. SAS Enterprise Miner for Windows (Version 9.2) software was used for
regression. This tool was selected due to the immense flexibility it provides in cleaning,
selecting, transforming, and analyzing large data sets. Specifically, for regression
(linear and logit), its capability to transform the independent predictor variables
according to various factors is very useful in handling outliers and increasing the
regression accuracy.
BIJ
Technique Variables Interpretability Fault tolerance
20,1
Linear Only interval/ratio scaledProvides degree and Adjusts for differential scale of
regression dependant and direction of influence; dependent/independent
independent variables automatically rejects variables, and for categorical
allowed variables with weak independent variables through
14 influence “dummies”
Logit/ Only binary, categorical Gives the probability of Same as linear regression
probit dependant variables occurrence of the dependant
regression allowed; independent variable; automatically
variables same as linear rejects variables with weak
regression influence
Cluster Input variables can be in Orders variables by power of Sensitive to differently scaled
analysis any scale discrimination; however, no inputs; requires

statistical test/estimate for transformations. Force fits all
goodness-of-fit variables, cannot distinguish
weak variables
Table IV. Neural Input variables can be in Requires separation of data Same as cluster analysis
Pros and cons of analysis networks any scale into training and validation
techniques considered for samples; issue of over/under
the study fitting
4. Data analysis
Our data anaysis flowchart is shown in Figure 3. First of all, we compute the seven IRIS
Ratios for four financial years (2006-2007 to 2009-2010) for the eight insurers.
This gives us 32 data points per ratio. We then compute the mean (m) and standard
deviation (s) for each IRIS Ratio. This helps us to establish ranges or risk buckets for
each IRIS Ratio. We set the first two ranges as m ^ 0.5s and m ^ s, respectively. The
third range is set as per NAIC IRIS cut-offs.
Compute the 7 IRIS Collect data for all 17 independent

Ratios for FY 2006-07 variables for FY 2006-07 to 2009-
to 2009-10 for all the 10 for all the 8 Insurance Fims
8 Insurerance Firms
Run Logit
High Risk Low Risk Regression of
32 data points for > 4 ratios violated ≤ 4 ratios violated risk cateory vs
each Ratio independent
Classify Insurers into variables
Risk Categories
based on number of
Compute Mean (µ) and IRIS Ratios violated Run Linear
Standard Deviation (σ) Regression of
for each IRIS Ratio number of IRIS
Ratios violated
vs independent
Compute “Normal Ranges” Compute number of variables
for each IRIS Ratio IRISRatios violated
Figure 3. for each range and
Data analysis flowchart Range 1 Range 2 Range 3
for each Insurer
Mean ± 0.5 σ Mean ± 1.0 σ NAIC Default Analyse Results
We find the number of IRIS Ratios violated for each range and for each insurer. We use General
this to classify insurers into a binary risk category for each of the four financial years. insurance firms
Similar to Chen and Wong (2004), they have been put into “low risk” category if
number of IRIS Ratios violated is less than four and “high risk” category for four or
more violations. Calculation of these seven ratios for the select eight firms and their
initial risk classification (in terms of the risk buckets and number of IRIS Ratios
violated) is shown in Table VI in results and discussions. Subsequently, we carry 15
out linear regression and logit regression analysis. For this, we collect the data for all
the identified 17 variables (Table III) and run linear regression of the number of IRIS
Ratio violated (dependent variable) versus these 17 independent variables. In logit
regression, we use risk category as the dependent variable.
Linear regression
The multiple linear regression equation used in this study has the general form:
Y ¼ b0 þ b1 YO þ b2 IYR þ b3 IIR þ b4 SI1 þ b5 SI2 þ b6 OM þ b7 PGR þ b8 LR

þ b9 LOB þ b10 UP þ b11 IC þ b12 CEM þ b13 MS þ b14 NI þ b15 ID þ b16 AIR
þ b17 INFC
Where, Y (dependent variable) is the number of IRIS Ratios violated by Insurer i for
Year j (1 # i # 8 and j takes values from 2008-2009, 2007-2008, 2006-2007,
2005-2006); YO, the years in operation measured by total no of years that the insurer
has been operating in India; IYR, the investment yield ratio; IIC, the investment
income ratio; SI1, the size estimate of insurer by value of total assets; SI2, the size
estimate of insurers by total value of gross premiums earned; OM, the operating
margin; PGR, the premium growth rate measured as change in premium earned; LR,
the liquidity ratio; LOB, the number of business segments in which the insurer
provides insurance; UP, the underwriting performance; IC, the total value of incurred
claims; CEM, the total value of commissions and expenses of management; MS, the
market share measure in percentage terms; NI, the number of competing general
insurers in the industry; ID, the insurance density; AIR, the average of the quarterly
PLR; INFC, the inflation rate as measured by the wholesale price index (WPI). The
bi’s are the individual regression coefficients of each variable and indicate the degree
(sign) and direction (magnitude) of influence of the predictor variable in determining
the outcome.
Logit regression
Logit regression allows us to investigate the relationship between a categorical outcome
and a set of explanatory variables. The logit regression gives the probability of occurrence
of the outcome. In our case, the dependent outcome is the risk category of insurers (“high” or
“low”). Risk classification based on IRIS Ratios was used as a proxy of insolvency risk.
The logit regression used in this study has the general form:
p
loge ¼ b0 þ b1 YO þ b2 IYR þ b3 IIR þ b4 SI1 þ b5 SI2 þ b6 OM þ b7 PGR þ b8 LR þ b9 LOB
12p
þ b10 UP þ b11 IC þ b12 CEM þ b13 MS þ b14 NI þ b15 ID þ b16 IR þ b17 INFC
BIJ Where loge ðp=ð1 2 pÞÞ is the logit (risk categorization which takes on two values
20,1 “high” or “low” with probabilities p and 1 2 p, respectively). The rest of the terms
carry the usual meanings as in the linear regression.
Intitutively, “firm size” is expected to be negatively correlated to insolvency. A highly
diversified insurer with a large product portfolio is likely to be exposed to more market
risks and more readily influenced by financial volatility. So, “lines of business” is
16 expected to be positively co-related to insurers’ insolvency. The more claims an insurer
incurs, the more liability it has to pay immediately. Hence, “incurred claims” are
expected to be positively co-related to insurers’ insolvency. Disproportionately large
spends on management salaries and fees could be a precursor for financial instability
or fraud. Hence, “commission and expenses of management” is assumed to be
positively related to insurers’ insolvencies. “Insurance density” (number of policies per
1,000 people) is also assumed to have a positive relationship with insurers’ insolvencies.
An initial hypothesis regarding the effects for a few predictor variables on the risk of
insolvency for Indian general insurance firms is presented in Table V.
5. Results and discussions

The initial risk classification of the eight insurers to be used as a proxy of insolvency
risk is shown in Table VI. These were used as inputs for linear regression and logit
regression.
Linear regression results

Linear regression based on the number of IRIS Ratios violated has been used as a direct
predictor of the insurer’s insolvency risk. This is a logical assumption given the fact that
risk classification by the NAIC involves scrutiny of the number of IRIS Ratios violated by
the insurer. Overall regression results for m ^ 0.5s had a p-value of 0.0186, i.e. the null
hypothesis that all the bi are equal to zero is rejected with 98.14 percent confidence.
Further, the regression had an R 2-value of 85.90 percent and an adjusted R 2-value of
63.34 percent implying that the predictor variables were able to account for 85.90 percent
of the variation in the outcome. Overall regression results for m ^ 1s had a p-value of
0.1648, i.e. the null hypothesis that all the bi are equal to zero is rejected with 83.52 percent
confidence. The regression had an R 2-value of 74.66 percent and an adjusted R 2-value of
Hypothesis Factors Expected effect

Firm specific factors
H1 Firm size 2
H2 Premium growth rate þ
H3 Liquidity ratio þ
H4 Lines of business þ
H5 Underwriting performance þ
H6 Incurred claims þ
H7 Commission and expenses of management 2
H8 Market share 2
Market/macro-economic factors
H9 Number of insurers (competition) 2
H10 Insurance density þ
Table V. H11 Average interest rate 2
Study hypotheses H12 Inflation rate change 2
Range 1 (m ^ 0.5 s) Range 2 (m ^ 1.0 s) Range 3 NAIC defaults

Firm Year No. of IRIS violated Risk category No. of IRIS violated Risk category No. of IRIS violated Risk category
Royal Sundaram 2008-2009 4 Low 0 Low 6 High

2007-2008 5 High 3 Low 6 High
2006-2007 6 High 5 High 5 High
Bajaj Allianz 2008-2009 4 Low 3 Low 3 Low
2007-2008 7 High 1 Low 5 High
2006-2007 4 Low 1 Low 4 Low
2005-2006 2 Low 2 Low 5 High
Tata AIG 2008-2009 3 Low 1 Low 4 Low
2007-2008 3 Low 0 Low 4 Low
2006-2007 2 Low 2 Low 5 High
2005-2006 6 High 4 Low 6 High
Reliance 2008-2009 6 High 1 Low 3 Low
2006-2007 7 High 4 Low 5 High
2005-2006 7 High 2 Low 2 Low
IFFCO Tokyo 2008-2009 2 Low 2 Low 4 Low
2007-2008 5 High 4 Low 4 Low
2006-2007 4 Low 1 Low 4 Low
2005-2006 2 Low 2 Low 4 Low
ICICI Lombard 2008-2009 5 High 2 Low 2 Low
2007-2008 5 High 0 Low 3 Low
2006-2007 6 High 2 Low 3 Low
2005-2006 6 High 3 Low 5 High
Chola Mandalam 2008-2009 3 Low 0 Low 6 High
HDFC Ergo 2008-2009 8 High 5 High 6 High
2006-2007 5 High 4 Low 6 High
2005-2006 7 High 4 Low 6 High
categorization output
General
insurance firms
Insurer risk
17
Table VI.
BIJ 34.11 percent implying that the predictor variables account for 74.66 percent of the
20,1 variation in the outcome. Similarly, overall regression results for IRIS Defaults had a
p-value of 0.0182, i.e. the null hypothesis that all the bi are equal to zero is rejected with
98.18 percent confidence. The regression had an R 2-value of 85.97 percent and an
adjusted R 2-value of 63.52 percent implying that the predictor variables were able to
account for 85.97 percent of the variation in the outcome. The select descriptive analysis
18 results of linear regression as appropriate for our study are shown in Table VII.
Logit regression results

For logit regression, the overall regression results for m ^ 0.5s had a p-value of 0.0005,
i.e. the null hypothesis that all the bi are equal to zero is rejected with 99.9995 percent
confidence. For m ^ s, overall regression had a p-value of 0.0029, i.e. the null
Overall regression results for IRIS Defaults had a p-value of 0.0003, i.e. the null
Thus, the predictors can be said to influence the insolvency risk categorization of the
selected insurers. The results of select logit regression are shown in Table VIII.
Expected
Variables sign m ^ 0.5s m^s IRIS defaults
Firm size (SI1) 2 2 33.7074 * * 0.000026 2 0.5484 * *

(0.0904) (0.4461) (0.0677 )
Firm size (SI2) 2 2 1.6279 * 0.000291 * 2 0.0997 *
(0.1587 ) (0.1676) (0.1749)
Premium growth rate (PGR) þ 0.00628 3.5676 * * * 20.0957
(0.8750) (0.0364 ) (0.8311)
Liquidity ratio (LR) þ 0.00569 0.00733 0.5341
(0.9902) (0.9188) (0.2032 )
Lines of business (LOB) þ 19.0412 * * * 20.0687 3.656 £ 10 2 07 *
(0.0161) (0.7546) (0.1746 )
Underwriting performance (UP) þ 24.4375 * * * 21.4323 0.0446
(0.0396) (0.5338) (0.5113)
Incurred claims (IC) þ 24.2140 * * 20.00015 0.0882 *
(0.0504) (0.4749) (0.1783 )
Commission and expenses of 2 11.9637 * 2 0.00036 * * 1.2015
management (CEM) (0.1246) (0.0726 ) (0.2035)
Market share (MS) 2 2 0.7864 2 151.7 * * * 8.4751
(0.7907 ) (0.0236 ) (0.5671)
Number of insurers 2 2 0.00786 Insignificant Insignificant
(competition) (NI) (0.2970)
Insurance density (ID) þ 3.7283 21.5968 21.0728
(0.6071) (0.5345) (0.9135)
Average interest rate (AIR) 2 4.8158 1.3245 0.4195
(0.4909) (0.3104) (0.9707)
Inflation rate change (INFC) 2 Insignificant 5.5673 101.1
(0.8317) (0.7051)
Table VII.
Select linear regression Notes: Significant at: *20, * *10 and * * *5 percent levels; italics values denote correlation coefficients
results in the hypothesized direction; p-values are in parenthesis below each coefficient
Expected IRIS
General
Variables sign m ^ 0.5s m^s defaults insurance firms
Firm size (SI1) 2 2 3.2773 25.491 17.0717
(0.9227 ) (0.6845) (0.9205)
Firm size (SI2) 2 2 1.909 £ 102 09 164.1 254.1044
(0.9025) (0.8149) (0.9342) 19
Premium growth rate (PGR) þ 211.4006 1.9573 215.9824
(0.7423) (0.71) (0.8317)
Liquidity ratio (LR) þ 2 2.3936 2 1.9802 23.7844
(0.9429) (0.9279) (0.9808)
Lines of business (LOB) þ 262.3005 2 1.3862 242.9839
(0.7734) (0.916) (0.9469)
Underwriting performance þ 1.936 1.1046 1.5733

(UP) (0.6735 ) (0.9162) (0.979 )
Incurred claims (IC) þ 2 0.00147 271.1935 22.2248
(0.7586) (0.867 ) (0.996)
Commission and expenses of 2 2 592 £ 102 12 2 20.1326 0.0318
management (CEM) (0.9959) (0.8122 ) (0.9935)
Market share (MS) 2 614.3 2 60.6716 43.8897
(0.7517) (0.7380 ) (0.928)
Number of insurers 2 Insignificant Insignificant Insignificant
(competition) (NI)
Insurance density (ID) þ 0.0150 210.1050 2 0.0516
(0.9796 ) (0.9259) (0.947)
Average interest rate (AIR) 2 2 0.00007 5.5673 0.000019
(0.8226 ) (0.8317) (0.9608)
Inflation rate change (INFC) 2 2 66.7156 31.8013 20.9305
(0.8341) (0.8269) (0.9641)
Table VIII.
Notes: Significant at: *20, * *10 and * * * 5 percent levels; italics values denote correlation coefficients Select logit regression
in the hypothesized direction; p-values are in parenthesis below each coefficient results
We describe the inferences for both, firm specific and market/macro-economic

predictors of health for general insurers based on regression results of our study. The
summary of our hypotheses results are shown in Table IX.
Firm-specific predictors for general insurers

Size of firm (insurer). As expected, firm size shows a strong negative influence on the
insurer insolvency risk. Even for the cases in which a positive relation is observed,
either the regression coefficients are extremely low (< 0 in the case of linear regression)
or have very low confidence levels (in the case of logit regression). Hence, the
significant values support our initial hypothesis.
Premium growth rate. Premium growth rate is found to have a mild positive
correlation with insolvency risk of the insurer. We get low positive regression coefficient
values in both linear and logit regression models. Though large negative coefficients are
observed for relaxed ranges and IRIS default ranges, the low confidence intervals lead us
to discard them. Thus, the initial hypothesis is validated.
Liquidity ratio. While the results of the linear regression coefficients all point towards
acceptance of the hypothesis that liquidity ratio has a positive effect on insolvencies,
BIJ Hypothesis Status Expected effect
20,1
Firm specific factors
H1 Accepted 2
H2 Accepted þ
H3 Inconclusive, needs further research þ
H4 Accepted þ
20 H5 Rejected þ
H6 Accepted þ
H7 Accepted 2
H8 Accepted 2
Market/macro-economic factors
H9 Rejected 2
Table IX. H10 Inconclusive, needs further research þ
Summary of hypotheses H11 Inconclusive, needs further research 2

results H12 Inconclusive, needs further research 2
care should be exercised here due to the extremely low confidence levels involved. Even
the best confidence level result is unsatisfactory for drawing any conclusions. The logit
regression result suggesting that liquidity ratio negatively affects insolvency risk also
suffers from equally low confidence levels. Hence, this hypothesis is not proved; there is
no conclusive evidence to prove the alternative hypothesis either. Thus, the influence of
liquidity ratio on insolvency risk remains unknown.
Lines of business. The linear regression with tight “Normal Range” proves the
hypothesis that the more diverse the insurer’s product portfolio (i.e. large number of
operational lines of business) the greater the probability of being exposed to market
volatility and hence greater probability of insolvency risk. These results are valid at
98 percent confidence levels. Analysis with IRIS default ranges shows similar results.
Analysis with relaxed “normal range” and logit regressions for all three range types
contradict these results. However, the low confidence levels of these contradictory
outputs allow us to disregard them.
Underwriting performance (combined ratio). The combined ratio is positively
correlated with the probability of predicting insurer risk category but the same is
found to be negatively correlated with predicting insurer risk (measured by number
IRIS Ratios violated). Since the only significant result is achieved in the latter case
(confidence level of 96 percent), the hypothesis is rejected and we conclude that
combined ratio is indeed negatively correlated with insolvency risk. This is in
agreement with Browne and Hoyt (1995).
Incurred claims. Linear multi-regression using tight and IRIS Default cut-off range
values validates the hypothesis that a rise in the value of incurred claims is positively
related to high insolvency risk for the insurer. High values for the regression coefficient
(24.21, using ^0.5s range) at 94 percent confidence level are obtained.
Commission and expenses of management. Commission and expenses of
management appears to have a very weak negative influence on insurer
insolvency risk. Positive influences are also observed between this variable and the
insolvency risk (some at high confidence levels of 87 percent). Hence outright acceptance
of the hypothesis is not possible and further research would be required to establish its
effect on insurer insolvency.
Market share. A strong negative correlation is found between market share and General
insolvency risk. As expected, high market share insurers’ have lesser risk of becoming insurance firms
insolvent due to factors discussed earlier. The large magnitudes of the significant
regression coefficients validate this hypothesis.
Market/macro-economic predictors for general insurers

The macro-economic predictors show mixed results. Clear cut (significant) influence is 21
not apparent for any of the predictors.
Number of insurers (competition). Interestingly, competition is found to be
insignificant (both in degree and direction) in influencing insolvency risk (both in the
linear and logit models). Logically, one would expect heightened competition to weed out
the weak firms and foster a healthy environment. The small sample size (32 records)
could be a cause of this anomaly though there is no way of testing this unless further
research (with more data) is carried out.
Insurance density. The results invalidate and nullify the initial hypothesis. However,
with none of the results being significant, it becomes difficult to make any decisions.
Hence further research is required to arrive at a suitable conclusion.
Average interest rate (Central Bank PLR). It is found to have a (non-significant)
positive effect on insurer insolvency. Even cases which report negative influence show
very weak linkages (regression coefficient ! 0) almost bordering on neutral.
Inflation rate change. The effect of inflation on insurer’s insolvency risk is not
established fully. While the logit regression reports a strong negative influence for the
tight range, the extremely low confidence (roughly 16 percent) does not allow us to
draw any conclusion. In fact, none of the reported values are significant even at
20 percent. Hence, our hypothesis is rejected.
6. Conclusions
This paper provides a framework for predicting insolvency risks of Indian general
insurers. Unlike earlier studies, it focuses on the private Indian general insurance
companies and uses firm data in analysing whether operational and marketing variables
can be used as a surrogate for predicting health of an insurer. Based on existing practices
and inputs from industry experts, it provides insurers with easy-to-use non-financial
indicators to benchmark their solvency risk relative to other similar firms. The NAIC IRIS
ratios method was used to obtain an initial risk classification of eight Indian insurers. The
regressions for the insurers in each cut-off range and financial year have yielded
statistically significant results consistent with a majority of the hypotheses formulated on
firm-specific factors which determine an insurer’s health. The descriptive statistics reveal
that the factors that most significantly influence the health of Indian general insurers are
lines of business, the firm’s market share, the premium growth rate, the underwriting
performance and the claims incurred. Further, the factors which have the strongest effect
on the health of Indian general insurers are market share, change in inflation rate, firm size,
lines of business and claims incurred. The rankings for these factors based on strength of
influence and confidence of influence from the analysis in our study are shown in Table X.
The results have important implications for monitoring the health of insurers and
proactively detecting “risky” firms for stricter regulatory scrutiny/action. For general
insurers, market share, no of lines of business, firm size, incurred claims and premium
growth rate significantly affect their financial health irrespective of the “normal range”
BIJ
Rankings for important predictors of Indian general insurer
20,1 insolvency risk
By strength of influence By confidence of influence
1. Market share 1. Lines of business (99%)

(inversely proportional)
22 2. Inflation rate 2. Market share (98%)
(direction unclear)
3. Firm size 3. Premium growth rate (97%)
Table X. (inversely proportional)
Rankings for important 4. Lines of business 4. Underwriting performance (97%)
predictors of Indian (directly proportional)
general insurer 5. Incurred claims 5. Incurred claims (95%)
insolvency risk (directly proportional)
specified by the regulator. Further, since market share, incurred claims, etc. (Table X)
have a high coefficient of influence, regulators must pay more attention to such
variables. As a first cut measure for gauging the health of insurer’s, the liquidity ratio
may be used since it is a direct measure of the firm’s financial health. In addition,
regulators must also monitor the underwriting performance, incurred claims, market
share and premium growth rates to adequately categorize insurers into risk buckets
based on future probability of financial insolvency.
This paper examined the firm-specific and macro predictors for the health of general
insurance companies in India. The research was confined to private general insurers
who have been operating for the last few years only. The major limitation of this study
is that the analysis was done on the last five years data (FY 2005-2009) of eight select
firms; this data set was too small to draw conclusive results in some hypotheses. This
study also did not consider the qualitative data for each insurance firm. Qualitative
assessment is an important process for better understanding of an insurer’s health.
Unlike the prevalent practice of dividing the list of available insurers into an analysis
sample and a holdout sample, no holdout sample was used and the entire data set was
subjected to statistical analysis. Limited data availability was the reason for this
approximation. Most of these limitaions can be overcome in subsequent studies a few
years down the line with availability of longer longitudinal data and more data points.
Future researchers should also investigate if it is possible to develop benchmarks
representing the maximum risk levels for each of the variables used.
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About the authors

Samir K. Srivastava is an Associate Professor in the area of Operations Management at the
Indian Institute of Management, Lucknow (India). He is a Graduate in Electrical Engineering
from Institute of Technology, BHU, MBA in Finance and Fellow of Indian Institute of
Management, Lucknow. He has over two decades of experience in teaching, research and
industry and has published extensively in reputed refereed journals like Omega, IJPDLM, BPMJ,
IJMTM, TQM&BE, IJMR, etc. His papers have received “Best Student Paper Award” and
“McGraw Hill Publishing Best Paper Award”. He is also on Scientific Advisory Board of Journal
of Remanufacturing. His major areas of interest are operations strategy, manufacturing
excellence, HR-operations interface, benchmarking, management of technopreneur-owned firms,
reverse logistics and sustainable supply chains. Further details are available at: http://ganga.
iiml.ac.in/, samir/. Samir K. Srivastava is the corresponding author and can be contacted at:
samir@iiml.ac.in
Avishek Ray did his BE (Computer Science) from JSS Academy of Technical Education,
Bangalore and thereafter worked in SAP Labs India Pvt Ltd for about three years. Subsequently,
he earned a post graduate diploma in Management from Indian Institute of Management,
Lucknow in 2011. He is presently with Deloitte Consulting, at Hyderabad (India). His areas of
interest are consulting and marketing.
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Benchmarking Indian General Insurance Firms

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Benchmarking: An International Journal

Benchmarking Indian general insurance firms

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Insurance Regulatory and

Life Insurance General Insurance

Public Private Public Private

Life Insurance Corporation Their entry has Aggressive growth Outperform

Concept of solvency for an insurance firm

The property-liability RBC formula focuses on the following aspects of an insurer’s

Major variables affecting solvency of an insurance firm

incurred losses to earned premium plus incurred expenses to written premium).

Relevant benchmarking applications in insurance context

Hershbarger, 1990; Brockett et al., 1994), nonparametric discriminant (BarNiv and

Research issues and gaps

were thereafter applied to estimate the significant factors (direction-wise and

Study various insurance regulatory mechanisms (Worldwide and India)

Decide sub-set of insurance firms for benchmarking study

Decide firm specific economic variables for insurance firm benchmarking

Select and use appropriate statistical tools and techniques

We therefore used the following criteria to select the Indian insurers:

S. no. Name of general insurance firm Operational from year

1 Royal Sundaram 2001

Selection of appropraiate analysis technique and tool

analysis any scale discrimination; however, no inputs; requires

Compute the 7 IRIS Collect data for all 17 independent

Y ¼ b0 þ b1 YO þ b2 IYR þ b3 IIR þ b4 SI1 þ b5 SI2 þ b6 OM þ b7 PGR þ b8 LR

5. Results and discussions

Linear regression results

Hypothesis Factors Expected effect

Range 1 (m ^ 0.5 s) Range 2 (m ^ 1.0 s) Range 3 NAIC defaults

Royal Sundaram 2008-2009 4 Low 0 Low 6 High

Logit regression results

Firm size (SI1) 2 2 33.7074 * * 0.000026 2 0.5484 * *

Underwriting performance þ 1.936 1.1046 1.5733

We describe the inferences for both, firm specific and market/macro-economic

Firm-specific predictors for general insurers

Summary of hypotheses H11 Inconclusive, needs further research 2

Market/macro-economic predictors for general insurers

1. Market share 1. Lines of business (99%)

insolvency risk (directly proportional)

About the authors

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