A study of financial insolvency prediction model for life insurers

Authors:
Shu-Hua Hsiao;Thou-Jen Whang
Affiliations:
Department of Financial Management, Leader University, Tainan 709, Taiwan;Department of Chemistry, National Cheng Kung University, Tainan, Taiwan
Venue:
Expert Systems with Applications: An International Journal
Year:
2009

Citing 5
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Abstract

The objective of insurer supervision is to monitor the financial solvency of companies and to protect the rights of consumers. Improving the related legislation and regulatory policy are also the goals of supervision. The purpose of this study is to evaluate the financial soundness by using the rating systems of the CAMEL and the risk-based capital (RBC) models. Moreover, it is to explore whether insurers exit a significance difference of financial stability or not between domestic and foreign branch life insurers. This study constructed an efficient insolvency prediction model and showed that the artificial neural network was more excellent for classification than the traditional discriminant method since the artificial neural network's accurate discrimination rate of 95.2% with a lower Type I error of 0.0274 and Type II error of 0.0769.