New Findings from Florida State University Describe Advances in Insurance (Regulatory Capital and Asset Risk Transfer): Insurance

2023 SEP 29 (NewsRx) -- By a News Reporter-Staff News Editor at Insurance Daily News -- New research on Insurance is the subject of a report. According to news reporting originating from Tallahassee, Florida, by NewsRx correspondents, research stated, “We explore whether life insurers use a unique reinsurance arrangement to manage assets tied to their regulatory capital. Typical reinsurance allows insurers to reduce their regulatory capital by transferring liabilities (reserves), and the associated assets, to reinsurers.”

Financial support for this research came from The authors thank Justin Sydnor, Greg Niehaus, Tom Merfeld, Pingyi Lou, Martin Grace, Evan Eastman, Patty Born, and participants of the University of Wisconsin-Madison seminar, APRIA meeting (2019), ARIA meeting (2019), ASSA meeting (2020), and Florida Sta.

Our news editors obtained a quote from the research from Florida State University, “With modified coinsurance (ModCo), insurers maintain control of their liabilities and assets while transferring regulatory capital requirements to the reinsurer. Holding fixed an insurer’s reported capital, we find that ModCo allows insurers to report higher risk-based capital ratios. Insurers with ModCo are less likely to fire sale downgraded bonds.”

According to the news editors, the research concluded: “We also find suggestive evidence of regulatory arbitrage, as most ModCo is purchased from reinsurers in countries with low capital requirements or within the same insurance group.”

This research has been peer-reviewed.

For more information on this research see: Regulatory Capital and Asset Risk Transfer. Journal of Risk & Insurance, 2023. Journal of Risk & Insurance can be contacted at: Wiley, 111 River St, Hoboken 07030-5774, NJ, USA. (Wiley-Blackwell - http://www.wiley.com/; Journal of Risk & Insurance - http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1539-6975)

The news editors report that additional information may be obtained by contacting Kyeonghee Kim, Florida State University, College of Business, Dr William T Hold Natl Alliance Program Risk Manag, Tallahassee, FL, United States. Additional authors for this research include J. Tyler Leverty and Joan T. Schmit.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1111/jori.12441. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

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