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An Empirical Analysis of Market Reactions to the First Solvency and Financial Condition Reports in the European Insurance Industry

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  • Nadine Gatzert
  • Dinah Heidinger

Abstract

In 2017, insurers in the European Union disclosed their Solvency and Financial Condition Reports (SFCRs) according to the third pillar of Solvency II for the first time. The aim of this article is to empirically analyze market reactions to the first SFCRs for all publicly listed insurers in the European Union that published an English report based on an event study. We thereby investigate which key figures and textual attributes matter most to investors, using regression analyses and text mining approaches. We also discuss potential areas for improvement concerning SFCR disclosure, such as a central public disclosure platform and further standardization of disclosure requirements, which could further enhance the goals of transparency and market discipline in relation to Solvency II's Pillar 3. Our results show that SFCR key figures matter more than textual features. Specifically, we find a significantly positive market impact of the solvency ratio calculated without transitionals or adjustments and a significantly negative one for the solvency capital requirement (SCR).

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  • Nadine Gatzert & Dinah Heidinger, 2020. "An Empirical Analysis of Market Reactions to the First Solvency and Financial Condition Reports in the European Insurance Industry," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 87(2), pages 407-436, June.
    • Handle: RePEc:bla:jrinsu:v:87:y:2020:i:2:p:407-436
    DOI: 10.1111/jori.12287
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    Cited by:

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    3. Enrique Bonson & David Perea & Graca Azevedo, 2021. "Tone and content analysis in the president’s letters to shareholders: Spanish evidence," Upravlenets, Ural State University of Economics, vol. 12(1), pages 78-90, March.
    4. Sanan Mukhtarov & Martijn Schoute & Jacco L. Wielhouwer, 2022. "The information content of the Solvency II ratio relative to earnings," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 89(1), pages 237-266, March.
    5. Paulusch, Joachim & Schlütter, Sebastian, 2022. "Sensitivity-implied tail-correlation matrices," Journal of Banking & Finance, Elsevier, vol. 134(C).
    6. Simon Fritzsch & Philipp Scharner & Gregor Weiß, 2021. "Estimating the relation between digitalization and the market value of insurers," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 88(3), pages 529-567, September.

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