The Study of Rate of Return in Property Insurance
1997
Hochschulschrift
Zugriff:
85
The Mandatory Vehicle Liability has changed dramatically in recent year,sothe academic argues violently about this insurance should be run in public orin private. Although insures know that the underwriting profit rate was zero in the rate-making, they still argue it should be run in private. The main reason is the time difference in premium receives and expenses,and insurers can utilize the funds to invest in other assets. The investments can bring lotsof profit and compensate the zero profit rate or any possibly induced loss. In the rate-making of property insurance, The investment profit is often neglected, so financial pricing models are employed in this reserch to combine underwriting profit and investment income, and expected the rate of returncan be evaluated more precisely. Besides the premium receive and expenses from underwriting side, the utilization of captial in the perspective is also evaluated in this research. Based on the financial data collected from whole property insurance industry and three publicinsurance companies, so me financial pricing models, such asTarget Total Rate of Return (TRR), Capital Asset Pricing Model (CAPM), Discount cash Flow Model(DCF), and Option Pricing Model (OPM), are employedto compare the underwriting profit margin and the actual rate of return in property insurance companies.Moreover, Mean Square Error (MSE) and Theil''s U statistic are utilized to examine the explanation ability of each model.The period in this researchcovers 1990 to 1995. The results of this study indicate that higher ranking usually tends to goto the option pricing model in the whole property insurance industry; in addition, thought the target underwriting profit margin intuitionallywon''t fluctuate with economic conditions. However, in the light of the average, CAPM and Target underwriting profit margin are closer to the average of the sample period. Next, if the sample period is separated into two time intrvals,the deviation of CAPM shrinks obviously in the second interval. Therefore, theincreasing competition in the market shouldn''tbe overlooked. Drawn from the results of this study, the explanation ability of each model is quite discrete; the existence of deviation is inevitable for the methodof collecting data, the surrounding circumstances of companies, and the developing situation of the whole market. On the whole, discount cash flow model performs quiet well in every stage, when employed in not only the insurance industry but also in individual companies.
Titel: |
The Study of Rate of Return in Property Insurance
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Autor/in / Beteiligte Person: | Kao, Cheng-lung ; 高承隆 |
Link: | |
Veröffentlichung: | 1997 |
Medientyp: | Hochschulschrift |
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