Endogenous risk in non-life insurance: evidence from theudGerman insurance sector during the Interwar period

摘要

Motivated by the recent 2007/2008 Financial Crisis, this dissertation identifies endogenous risk in the German insurance sector during the Interwar sector. In the context of principal agent theory, endogenous risk is the result of a company reacting to shocks that are generated and amplified within the financial system by shifting risk from shareholders to policyholders. This dissertation provides analytical support for this interdependence on the basis of established financial as well as actuarial models and assumptions. The empirical analysis considers the German insurance sector during the Interwar period due to the presence of a pronounced business cycle, the absence of exogenous low-probability high-cost events, a consistent regulatory framework as well as available quantitative data. The econometric analysis is based on four newly compiled datasets that collect the 1924 gold account opening balances, company- as well as line-specific financial information, and stock price quotations for all publicly traded German insurance companies during the Interwar period. The dissertation finds that during the Interwar period in the German insurance sector (Ch.2), the risk of getting discontinued prior to default (3) led companies to cater dividend payout (Ch.4) and reinsurance operations (Ch.5) to an optimistic investor clientele (Ch.6), yet in contrast to the underwriting cycle (Ch.7).