Explanatory variables and their expected signs in the Z-score regressions
| Explanatory variable | Definition | Expected sign | Data source | References |
|---|---|---|---|---|
| Size | Natural log of total assets | + | Authors' calculation using DGSFP data | Chen and Wong (2004), Pasiouras and Gaganis (2013), Shim (2017) |
| Profitability | Profits after tax divided by total assets | + | Authors' calculation using DGSFP data | Sharpe and Stadnik (2007), Caporale et al. (2017) |
| Capitalization | Equity-to-total assets ratio | + | Authors' calculation using DGSFP data | Shim (2011), Altuntas and Rauch (2017) |
| Reinsurance | Reinsurance premiums paid divided by total premiums earned | + | Authors' calculation using DGSFP data | Ho et al. (2013), Mankaï and Belgacem (2016), Caporale et al. (2017) |
| Portfolio risk | Equity securities in the asset portfolio divided by total assets | − | Authors' calculation using DGSFP data | Cummins et al. (2017) |
| Underwriting risk | SD of the loss ratio over the sample period, defined as incurred losses divided by premiums earned, net of reinsurance | − | Authors' calculation using DGSFP data | Altuntas and Rauch (2017) |
| Long-tailed business | Technical provisions (loss reserves) divided by incurred losses | − | Authors' calculation using DGSFP data | Sharpe and Stadnik (2007), de Haan and Kakes (2010), Ho et al. (2013) |
| Mutual | Dummy variable that takes on a value of 1 for mutual companies and 0 otherwise | + | Authors' calculation using DGSFP data | Pasiouras and Gaganis (2013), Shim (2017), Altuntas and Rauch (2017) |
| Life insurance | Dummy variable that takes on a value of 1 if life technical provisions are at least 80% of overall technical provisions and 0 otherwise | + | Authors' calculation using DGSFP data | Chen and Wong (2004), Pasiouras and Gaganis (2013), Eling and Marek (2013) |
| Industry concentration | Herfindahl-Hirschman index, calculated as the sum of the squares of all insurance companies' market shares in terms of premiums written (as a percentage) | ± | MAPFRE (2018) | Ho et al. (2013), Caporale et al. (2017) |
| Year dummies | Dummy variables used to control for macroeconomic conditions and time-specific effects |
| Explanatory variable | Definition | Expected sign | Data source | References |
|---|---|---|---|---|
| Size | Natural log of total assets | + | Authors' calculation using DGSFP data | |
| Profitability | Profits after tax divided by total assets | + | Authors' calculation using DGSFP data | |
| Capitalization | Equity-to-total assets ratio | + | Authors' calculation using DGSFP data | |
| Reinsurance | Reinsurance premiums paid divided by total premiums earned | + | Authors' calculation using DGSFP data | |
| Portfolio risk | Equity securities in the asset portfolio divided by total assets | − | Authors' calculation using DGSFP data | |
| Underwriting risk | SD of the loss ratio over the sample period, defined as incurred losses divided by premiums earned, net of reinsurance | − | Authors' calculation using DGSFP data | |
| Long-tailed business | Technical provisions (loss reserves) divided by incurred losses | − | Authors' calculation using DGSFP data | |
| Mutual | Dummy variable that takes on a value of 1 for mutual companies and 0 otherwise | + | Authors' calculation using DGSFP data | |
| Life insurance | Dummy variable that takes on a value of 1 if life technical provisions are at least 80% of overall technical provisions and 0 otherwise | + | Authors' calculation using DGSFP data | |
| Industry concentration | Herfindahl-Hirschman index, calculated as the sum of the squares of all insurance companies' market shares in terms of premiums written (as a percentage) | ± | ||
| Year dummies | Dummy variables used to control for macroeconomic conditions and time-specific effects |
Sharing content requires targeting cookies to be enabled. Please update your cookie preferences to use this feature.