A Comparative Analysis of U.S. Property and Casualty Reinsurers and Insurers

Abstract

In empirical research related to the property-casualty insurance industry, studies commonly focus on either insurers or reinsurers. However, in many cases, the definition used to make the distinction between the two groups is often not clearly defined and/or the definition varies across studies. This variation could result in a substantially different group of firms being included or excluded from the study, thereby affecting the empirical results obtained. This study builds upon Chen and Hamwi, who compare the performance of U.S. insurers and reinsurers. The objective of the study is fourfold: (1) to compare the definitions of insurer and reinsurer commonly used in prior research to identify differences, (2) to expand upon the traditional methods of classifying insurers and reinsurers, (3) to compare the individual firm-level characteristics of insurers and reinsurers to detect potential variation across categories and across definitions, and (4) to analyze the impact of different definitions on the results of multivariate analyses exploring common research questions. The univariate results indicate that there are some variations in the characteristics of the firms based on the categorization of insurers and reinsurers arising from different definitions. In addition, we find that there are significant differences in the regression results when comparing models based on various definitions of reinsurers utilized in prior research and when professional reinsurers and incidental reinsurers are grouped together. As such, it is possible that the definition used to include or exclude reinsurers from the sample can impact the results.