Estimating and Explaining the Financial Performance of Property and Casualty Insurers: A Two-Stage Analysis

The purpose of this study is to estimate and explain the performance of nonlife (i.e., property and casualty) insurers. The analysis consists of two stages. First, we propose the use of a multicriteria method to assess the condition of insurers while considering simultaneously a set of conflicting financial criteria. Then, we use regression analysis to examine the influence of firm-specific and country-specific attributes on the overall measure of performance obtained during the first stage. Macroeconomic conditions such as gross domestic product (GDP) growth, inflation, and income inequality are the most robust predictors of performance. However, other country-specific characteristics that relate to the institutional environment and financial or economic freedom do not appear to matter.