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The Determinants of Financial Health of Asian Insurance Companies

31 Pages Posted: 15 Sep 2004  

Renbao Chen

National University of Singapore (NUS) - NUS Business School

Kie Ann Wong

National University of Singapore (NUS) - Department of Accounting

Abstract

Previous studies of financial health of insurance companies are mainly focused on insurers operating in the United States and developed economies. This article focuses on the solvency of general (property-liability) and life insurance companies in Asia using firm data and macro data separately. It uses different classification methods to classify the financial status of both general and life insurance companies. With the exception of Japan, failures of insurers in Singapore, Malaysia, and Taiwan are nonexistent. We find that, first, the factors that significantly affect general insurers' financial health in Asian economies are firm size, investment performance, liquidity ratio, surplus growth, combined ratio, and operating margin. Second, the factors that significantly affect life insurers' financial health are firm size, change in asset mix, investment performance, and change in product mix, but the last three factors are more applicable to Japan. Third, the financial health of insurance companies in Singapore seems to be significantly weakened by the Asian Financial Crisis. As the insurance industry in different Asian economies is at different stages of development, they require different regulatory guidelines.

Suggested Citation

Chen, Renbao and Wong, Kie Ann, The Determinants of Financial Health of Asian Insurance Companies. Journal of Risk and Insurance, Vol. 71, No. 3, pp. 469-499, September 2004. Available at SSRN: https://ssrn.com/abstract=591544

Renbao Chen (Contact Author)

National University of Singapore (NUS) - NUS Business School ( email )

1 Business Link
Singapore, 117592
Singapore

Kie Ann Wong

National University of Singapore (NUS) - Department of Accounting

1 Business Link
Singapore, 117592
Singapore

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