Guaranty Funds and Risktaking: Evidence from the Insurance Industry

Working Paper FR 95-07

Posted: 28 Jun 1998

See all articles by Soon-Jae Lee

Soon-Jae Lee

Samsung Fire & Marine Insurance Co., Ltd.

David Mayers

University of California, Riverside (UCR) - A. Gary Anderson Graduate School of Management

Clifford W. Smith

Simon Graduate School of Business, University of Rochester

Date Written: February 1995

Abstract

This paper examines changes in property-liability insurers risktaking associated with the enactment of state guaranty fund laws. We present evidence that the risk of insurers' asset portfolios increased following enactments. But the increase in risk is significant only for stock insurers. This evidence of increased asset risk following guarantee-fund adoptions helps explain the increase in insurer insolvencies in recent years.

JEL Classification: G22

Suggested Citation

Lee, Soon-Jae and Mayers, David and Smith, Clifford W., Guaranty Funds and Risktaking: Evidence from the Insurance Industry (February 1995 ). Working Paper FR 95-07. Available at SSRN: https://ssrn.com/abstract=7388

Soon-Jae Lee

Samsung Fire & Marine Insurance Co., Ltd.

Seoul
KOREA

David Mayers

University of California, Riverside (UCR) - A. Gary Anderson Graduate School of Management ( email )

Riverside, CA 92521
United States
909-787-3443 (Phone)
909-787-2933 (Fax)

Clifford W. Smith (Contact Author)

Simon Graduate School of Business, University of Rochester ( email )

Carol Simon Hall 3-202C
Rochester, NY 14627
United States
585-275-3217 (Phone)
585-442-6323 (Fax)

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