Testing for trade-offs in the reinsurance decision of U.K. life insurance firms

Hala Abdul Kader, Mike Adams, Kostas Mouratidis

Research output: Contribution to journalArticlepeer-review

16 Citations (Scopus)

Abstract

Drawing a framework from the insurance and finance literature, we test for trade-offs between underwriting, solvency, and tax management objectives in the decision to purchase reinsurance in U.K.-based life insurance firms. Using a panel data design covering 630 firm-year observations for 1992-2004, we observe that underwriting and solvency risks, and expected taxes, appear to be important determinants of the level of reinsurance purchased by U.K. life insurance firms. Additionally, some of these key determinants interact with each other, suggesting that the reinsurance decision is conjointly determined. Two of the three interactions tested, however, have an impact that is in the direction opposite to that predicted. In addition, firm-specific factors, such as product mix and profitability, appear to explain the corporate decision to purchase reinsurance.
Original languageEnglish
Pages (from-to)491-522
Number of pages32
JournalJournal of Accounting, Auditing and Finance
Volume25
Issue number3
DOIs
Publication statusPublished - Jun 2010

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