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美國產險業
CEO
更迭與再保險需求
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Purchasing reinsurance from affiliated insurers has benefits. Doherty and Smetters
(2005) find heavy use of monitoring when the primary insurer and reinsurer are affiliates
where monitoring costs are lower. On the other hand, there exists little or no use of
monitoring on the primary insurers when the primary insurers and reinsurers are not affiliates
(i.e., not part of the same financial group). Purchasing reinsurance from affiliated insurers
also has drawbacks because it would not reduce underwriting risk from the perspective of the
financial group.
The benefit of purchasing reinsurance from non-affiliated reinsurance is risk reduction.
However, purchasing reinsurance from non-affiliated reinsurance has the disadvantage of
reinsurance cost. Insurers which purchase reinsurance from non-affiliated reinsurers suffer
from profit reduction.
New CEOs may change their behavior in reinsurance policy to alter risk profits and
expected profitability of insurers. Whether purchases reinsurance from affiliated reinsurers or
from non-affiliated reinsurers will be based on CEO’s risk-taking behavior.
Financial scandals at some of the large corporations such as Enron have a devastating
impact on investor confidence. Subsequent passage of the Sarbanes–Oxley Act (SOX) of
2002 has led to some changes in board composition. Wang, Davidson, and Wang (2010) find
that CEOs have become significantly more risk averse following the passage of the SOX. It
is interesting to examine whether new CEOs would purchase more reinsurance post-SOX.
Our sample consists of 252 U.S. property casualty insurance companies and 2,772 firm-
years during the period from 2000 through 2010. Our evidence shows that insurers with CEO
turnover are more likely to increase reinsurance demand than insurers without CEO turnover
after CEO turnover. Specifically, an insurer with new CEO is more likely to have a more
conservative strategy and thus increase demand for reinsurance because new CEO does not
have much track records with the board and trust from the board. More detailed analyses
indicates that insurers with non-routine (forced) CEO turnover are more likely to increase
reinsurance than insurers without CEO turnover, but insurers with routine (voluntary) CEO
turnover are not likely to change reinsurance policies after CEO turnover. One possible
explanation for these results is that an insurer with a new CEO resulting from non-routine
(forced) CEO turnover is more likely to have a more conservative strategy and thus
increased demand for reinsurance to stabilize earnings and reduce risk to protect the job
security of new CEO. If insurers suffer huge losses and have insufficient reinsurance, new
CEOs are more likely to be fired than CEOs without turnover. The evidence shows that the
interaction effect between mutual form and CEO turnover is negatively related to reinsurance