145 - Are non-risk based capital requirements for insurance companies binding?

DNB Working Papers
Date 31 August 2007

We investigate the capital structure of 350 Dutch insurers during the period 1995-2005. Our main findings are: (1) a small company size, a mutual organisation, high profitability, large equity investments, and being a fire insurer, all contribute to higher solvency margins; (2) minimum solvency requirements from the supervisor are less easy to explain by firm characteristics and do not correlate positively with risk; (3) neither do insurers follow solvency requirements closely; (4) most insurers have surplus capital which, together with a large company size and high profitability, reduces the risk of insolvency. JEL codes: G22, G32. Keywords: Insurance companies, Capital structure, Solvency requirements.