The Relations among Risk Choice, Price and Capital Decision in the Property-Liability Insurance Industry

• Main Authors: Yun-Hsiu Wang, 王云秀
• Other Authors: Wen-Chang Lin
• Format: Others
• Language: en_US
• Published: 2003
• Online Access: http://ndltd.ncl.edu.tw/handle/65848197531273532358

碩士 === 國立中正大學 === 財務金融研究所 === 91 === This paper investigates the interrelations among capital, risk and price simultaneously in the Taiwan’s property liability insurance industry. The autoregressive framework employed in this paper could generate more efficient estimators than merely examining the relationship between each of two variables separately undertaken by most previous studies. Moreover, VAR model is firstly used on discussing this issue since capital slow adjustment is expected in Taiwan’s market which is due to stringent regulation on investment decision and information asymmetry, in which cause the lagged effect among capital, risk and price. The results by using VAR model support the fact that current capital level is indeed affected by the lagged value of risk and price for many insurers. Similarly, current risk choice and price decision also relate to the lagged value of the other two variables. However, no obvious relationship exists among concurrent value of capital, risk and price in Taiwan is found by using simultaneous partial adjustment model, which is used by most previous studies. In general, we conclude that, for the Taiwan’s P/L insurance market, using VAR model based on dynamic time series data could be more efficient than cross-sectional based simultaneous partial adjustment model in analyzing the relations among capital, risk and price.