Department of Banking and Finance National Chi-Nan University,Department of Finance and Law California State University Los Angeles,Department of Finance Florida Atlantic University,Department of Finance National Chung-Cheng University
This research uses the logit, tobit and survival time models to investigate the influence of regulatory forbearance and rate regulation on the insolvency probability, insolvency cost, and the survival time of the financially distressed insurers in the U.S. property/liability insurance industry. Among the findings, the results indicate that the risk based capital (RBC) regulation increases the forbearance time of impaired insurers, leading to a significant intervention delay for regulators. The results also suggest that regulators should consider more rate deregulation to increase the financial soundness of insurers. This research provides insurance regulators with important insights regarding the forbearance policy, rare regulation as well as risk-taking monitoring of insurers.