Publication detail

Early Warning System for the European Insurance Sector

Author(s): doc. PhDr. Ing. Ing. Petr Jakubík Ph.D. Ph.D., Lorenzo Danieli
Type: Articles in journals with impact factor
Year: 2022
Number: 0
ISSN / ISBN:
Published in: Journal of Economics, vol. 70, no. 1, pp 3-21.
Publishing place:
Keywords: early warning system, insurance sector, financial distress
JEL codes:
Suggested Citation:
Grants: GACR 20-00178S - The impact of the normalisation of interest rates on risk management
Abstract: This study proposes an Early Warning System model composed of macro-financial and company-specific indicators that could help to anticipate a potential market distress in the European insurance sector. A distress is de-fined as periods in which insurance companies’ equity prices crash and CDS spreads spike simultaneously. The model is estimated using a sample of 36 insurance companies that are listed. Based on a fixed-effects panel binomial logit specification, empirical evidence shows that economic over-heating that could be manifested by high economic growth, inflation and interest rates have negative impact on insurance sector stability. At the company level, a drop in return on assets and price-to-book value or raising operating expenses increase the likelihood of distress occurrence.

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