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The determinants of capital in the PC insurance industry Authors: Elena Grubisic , Darrell Leadbetter ARIA Annual

Agenda. Why study the determinants of capital? Literature review Data

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The determinants of capital in the PC insurance industry Authors: Elena Grubisic , Darrell Leadbetter ARIA Annual

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    1. The determinants of capital in the P&C insurance industry Authors: Elena Grubisic , Darrell Leadbetter ARIA Annual Meeting Quebec City, August 6, 2007

    2. Agenda

    3. Why the determinants of capital?

    4. Canadian P&C industry 2006 data2006 data

    5. Federal/provincial supervision 2006 data : 190 + 155 = 3452006 data : 190 + 155 = 345

    6. More capital in the industry Last value: 2006Last value: 2006

    7. Growing capital & insolvency (Canada) Last value: 2006Last value: 2006

    8. Growing capital & insolvency (U.S.) Last value : 2006Last value : 2006

    9. The role of capital

    10. The role of capital

    11. Insurance company capital

    12. Insurance company capital

    13. International trends

    14. Agenda

    15. Literature review

    16. Determinants of capital

    17. Capital allocation/budgeting models

    18. Agenda

    19. Determinants of capitalization

    20. Data & methodology

    21. Dependent variables

    22. Independent variables

    23. Independent variables

    24. Agenda

    25. Regression results (p-values)

    26. Regression results Significance up to 5%Significance up to 5%

    27. Regression results Significance up to 5%Significance up to 5%

    28. Regression results Significance up to 5%Significance up to 5%

    29. Agenda

    30. Earnings increase capital

    31. Cost of capital - practice

    32. Signaling Continuum of opacity: - asset backed sectors (with secured finances or physical assets) were found to be the least opaque - those with the most uncertainty (for investors/creditors) in the financial outcome were more opaque (mining ventures, insurance, banking). Capital reduces the concern of stakeholders about the solvency of a financial institution.Continuum of opacity: - asset backed sectors (with secured finances or physical assets) were found to be the least opaque - those with the most uncertainty (for investors/creditors) in the financial outcome were more opaque (mining ventures, insurance, banking). Capital reduces the concern of stakeholders about the solvency of a financial institution.

    33. Observations - regulation

    34. Observations - regulation

    35. Summary

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