My dissertation examines property-liability insurer rating transitions for the period 1995 through 2006. The sample includes over 2,000 US insurers and 10 years of ratings data from A.M. Best. Rating transitions reflect changes in insurer "default risk", and this area has not been fully explored in the insurance literature. This dissertation studies the predictors of insurer rating transitions and the non-Markovian behaviors within insurer rating movements. The research questions and results are presented in two essays. The first essay, Macroeconomic Factors and Property-Liability Insurer Rating Transitions, identifies the exogenous macroeconomic and market factors that predict rating transitions, while controlling for certain firm-specific characteristics such as rating history, firm size, business mix, and organization types. Realizing the possible multiple spells (multiple upgrade or downgrade transitions for an insurer during the sample period), I apply the PWP-Gap model, a powerful survival analytical technique. The results suggest that the intensities of insurer rating transitions, including upgrade and downgrade transitions, are linked to macroeconomic and market covariates. Macroeconomic factors are more influential in the upgrade intensity, while market factors are more influential in the downgrade intensity. The second essay, The Importance of Rating Drift Among Property-Liability Insurers, detects rating drift phenomena, which have been explored in the bond literature, but not yet in insurer rating transitions. With a survival analytical techniqueâCox Proportional Hazard Model--three main rating drift phenomena are examined: first-rating phenomenon, momentum drift phenomenon, and time dependence phenomenon. I find that those rating drift phenomena observed in the bond rating movements are present for insurer rating migrations. The findings of the current study carry implications for various parties in the insurance market. For regulators, this study suggests that information about rating changes can be used as potential early indicators of insurer financial strength. For consumers and agents, this study suggests consumers and agents should be especially observant of insurer rating downgrades, especially when in turbulent economic environments and severe industry conditions. For insurers, this study suggests insurers may use the results here to manage their own operation risk, taking into account the various exogenous and endogenous environments. In addition, for the investors in insurance companies, the results may be useful in developing various investment strategies. / A Dissertation Submitted to the Department of Risk Management/Insurance in Partial
Fulfillment of the Requirements for the Degree of Doctor of Philosophy. / Summer Semester, 2009. / June 4, 2009. / Insurer Rating Drift, Macroeconomic and Market Predictors, Insurer Rating Transitions / Includes bibliographical references. / James M. Carson, Professor Directing Dissertation; Pamela K. Coats, Outside Committee Member; Richard B. Corbett, Committee Member; Cassandra Cole, Committee Member; Randy E. Dumm, Committee Member; Patrick F. Maroney, Committee Member; Kathleen A. McCullough, Committee Member.
| Identifer | oai:union.ndltd.org:fsu.edu/oai:fsu.digital.flvc.org:fsu_175809 |
| Contributors | Wang, Yuling, 1971- (authoraut), Carson, James M. (professor directing dissertation), Coats, Pamela K. (outside committee member), Corbett, Richard B. (committee member), Cole, Cassandra (committee member), Dumm, Randy E. (committee member), Maroney, Patrick F. (committee member), McCullough, Kathleen A. (committee member), Department of Risk Management/Insurance, Real Estate and Legal Studies (degree granting department), Florida State University (degree granting institution) |
| Publisher | Florida State University, Florida State University |
| Source Sets | Florida State University |
| Language | English, English |
| Detected Language | English |
| Type | Text, text |
| Format | 1 online resource, computer, application/pdf |
| Rights | This Item is protected by copyright and/or related rights. You are free to use this Item in any way that is permitted by the copyright and related rights legislation that applies to your use. For other uses you need to obtain permission from the rights-holder(s). The copyright in theses and dissertations completed at Florida State University is held by the students who author them. |
Page generated in 0.0023 seconds