This article presents new evidence on the cost of equity capital by line of insurance for the property-liability insurance industry. To do so we obtain firm beta estimates and then use the full-information industry beta (FIB) methodology to decompose the cost of capital by line. We obtain...

Risk management is now present in many economic sectors. This paper investigates the role of risk management in creating value for financial institutions by analyzing U.S. property-liability insurers. Property-liability insurers are financial intermediaries whose primary role in the economy is...

This article focuses on the demutualization process and investigates why certain mutuals undergo this organizational structure change. The primary motivation for conversion is access to capital. By statute, mutual firms are limited in their capital-raising activities while stock firms can...

Purchasing reinsurance reduces insurers’ insolvency risk by stabilizing loss experience, increasing capacity, limiting liability on specific risks, and/or protecting against catastrophes. Consequently, reinsurance purchase should reduce capital costs. However, transferring risk to reinsurers...

This paper provides new information on the effects of deregulation and consolidation in financial services markets by analyzing the Spanish insurance industry. The sample period 1989-98 spans the introduction of the European Union's (EU) Third Generation Insurance Directives, which deregulated...

This paper evaluates the need for a government role in insuring natural and man-made catastrophes in the United States. Although insurance markets have been stressed by major natural catastrophes, such as Hurricane Katrina, government involvement in the market for natural catastrophe insurance...

This paper provides new information on the effects of deregulation and consolidation in financial services markets by analyzing the Spanish insurance industry. The sample period 1989-1998 spans the introduction of the European Union’s Third Generation Insurance Directives, which deregulated...

A limitation of the existing financial pricing models is the implicit or explicit assumption that insurers produce only one type of insurance, even though most insurers produce multiple types of coverage with differing risk characteristics and liability growth rates. The purpose of this paper is...

In this paper we investigate the extent to which insurance companies utilize financial derivatives contracts in the management of risks. The data set we employ allows us to observe the universe of individual insurer transactions for a class of contracts; namely those normally thought of as...