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Derivative Hedging and Insurer Solvency: Evidence from Taiwan

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  • Yung-Ming Shiu

    (Department of Business Administration, National Cheng Kung University, 1, University Road, Tainan 701, Taiwan.)

Abstract

Using company-level panel data (2001–2003), this paper empirically examines whether Taiwanese insurers' use of derivatives for hedging purposes is significantly related to their solvency (as measured by solvency ratio). Contrary to the public's perception that firms with derivative programmes have a higher level of solvency if derivatives are employed for hedging purposes, our results indicate that life insurers' derivative hedging generally is not associated with solvency, while non-life insurers using derivative hedging have a lower level of solvency.

Suggested Citation

  • Yung-Ming Shiu, 2010. "Derivative Hedging and Insurer Solvency: Evidence from Taiwan," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 35(3), pages 469-483, July.
    • Handle: RePEc:pal:gpprii:v:35:y:2010:i:3:p:469-483
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    Cited by:

    1. Liu, Hui-Hsuan & Chang, Ariana & Shiu, Yung-Ming, 2020. "Interest rate derivatives and risk exposure: Evidence from the life insurance industry," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    2. Shiu, Yung-Ming, 2020. "How does reinsurance and derivatives usage affect financial performance? Evidence from the UK non-life insurance industry," Economic Modelling, Elsevier, vol. 88(C), pages 376-385.

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