Insurance Company Failures: Why Do They Cost so Much?
Georgia State University Center for Risk Management and Insurance Research Working Paper No. 03-1
39 Pages Posted: 20 Nov 2003
Date Written: October 30, 2003
Abstract
Historical evidence shows insurer insolvencies are, on average, three-to-five times more expensive than those of other financial institutions. Using a unique dataset of insurer insolvencies from 1986 to 1999, we examine the cost of insolvency resolution and the factors driving these costs. We find firms in relatively better shape before being seized impose lower costs on the insolvency system. Further, we find evidence consistent with non-benevolent behavior by regulators, both before and after the firm fails, which adds significantly to the resulting costs of the insolvency.
Keywords: Insurance, bankruptcy, regulation
JEL Classification: G22, G28, G33
Suggested Citation: Suggested Citation
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