Loss Reserve Manipulation in the P/L Insurance Industry

• Main Authors: Pei Shin Lin, 林佩欣
• Other Authors: Yi Hsun Lai
• Format: Others
• Language: zh-TW
• Published: 2007
• Online Access: http://ndltd.ncl.edu.tw/handle/55752951783018304884

碩士 === 國立暨南國際大學 === 財務金融學系 === 95 === Previous researches have shown that P/L insurers may manipulate their loss reserves for various purposes, including income smoothing, taxes minimization, as well as rates regulation. However, some major legal amendments of solvency regulation and the enactment of risk based capital requirement in 1994 have driven the P/L insurance industry to takes some actions in response. One of the typical examples is that insurers often amend their loss reserves in order to meet regulatory requirement which is never considered by previous studies. In this study, we investigate how risk-based capital requirement may affect the loss reserves manipulation by P/L insurers. Besides, we also examine whether IBNR reserves are the sources of claim manipulation. Instead of traditional method of conditional mean model, we employ conditional quantile regression in this study because it is a more robust method when the distribution of loss reserving error is found to be highly skewed. Our evidence find the main manipulate motivation of loss reserving error is relate to tax minimization under traditional mean model. However, we discover that the principal motives of loss reserving error for upper quantiles are earning smooth and tax minimization, and for lower quantiles is related to solvency regulation by using quantile regression method. Finally, our evidence shows that both IBNR and case reserves are the sources of claim manipulation whether we utilize ordinary least square or quantile regression method.