The Determinants of Financial Derivatives Use in the UK life Insurance Industry.

Hardwick, P. and Adams, M., 1999. The Determinants of Financial Derivatives Use in the UK life Insurance Industry. Working Paper. Poole, UK: Bournemouth University School of Finance and Law.

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This paper examines the determinants of financial derivatives use in the United Kingdom (UK) life insurance industry. We estimate a probit regression model and a Heckman two-stage sample selection regression model using a sample of 88 UK life insurers in 1995. Our results indicate that the propensity to use derivative instruments is positively related to a firm’s size, leverage and international links, and negatively related to the extent of reinsurance. We also find that mutual life insurance firms have a greater propensity to use derivatives than proprietary firms. The positive relation with leverage and the negative relation with reinsurance support the hypothesis that UK life insurers use derivatives to offset risk, rather than as a speculative means of income generation.

Item Type:Monograph (Working Paper)
Additional Information:Insurance Trends, Issue 21, April
Uncontrolled Keywords:UK, financial derivatives, Life insurance industry, probit regression model, accounting
Subjects:Social Sciences > Finance and Financial Economics
Social Sciences > Commerce
Group:Faculty of Management
ID Code:2893
Deposited On:18 Dec 2007
Last Modified:07 Mar 2013 14:38


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