Risk management and the cost of equity: evidence from the United Kingdom’s non-life insurance market

Vineet Upreti, Mike Adams, Yihui Jia

Research output: Contribution to journalArticlepeer-review


We investigate the effect of risk management (reinsurance) on the corporate cost of equity using panel data drawn from the United Kingdom’s (UK) non-life insurance industry. Our results show that use of reinsurance lowers the cost of equity but that the relation is non-linear. We find that the rate of reduction declines as the level of premiums ceded relative to total gross premiums written increases. We also find that the reinsurance-cost of equity relation is moderated by the risk of financial distress/bankruptcy. This moderating relation is robust to the use of three alternative measures of financial distress and bankruptcy risk.

Original languageEnglish
JournalThe European Journal of Finance
Early online date8 Jun 2021
Publication statusPublished - 2021


  • bankruptcy
  • cost of equity
  • insurance
  • reinsurance
  • Risk management
  • UK

ASJC Scopus subject areas

  • Economics, Econometrics and Finance (miscellaneous)

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