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What drives insurance companies´ stock returns? The impact of new rules and regulation
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The contribution of this dissertation is to highlight the financial market efficiency
theory based on insurance companies' stock performance focusing on the main drivers
of expected returns and the impacts of new rules and regulation. The methodology is
based on the return decomposition model. The insurance sector is represented by four
major players and the analysis performed during the period of financial turbulences and
economic recovery. Distinction is made between large and small players and relevance
is given to “Return News” as main drivers of stock returns for the first and to “Cash-
Flows News” for the latter. This evidence is supported by a vector autoregressive model
and an impulse response analysis. These findings represent a major challenge for the
sector in terms of risk management, strategy settings and supervision process, given the
impact on market and equity risk modules, under the Solvency II regime, as risk-based
approaches and capital adequacy framework, especially given the importance of large
players in case of distress, for the systemic risk and real economy, and the low
expressiveness of small players listed securities, in peripheral countries where new
capital sources are available, toward the upcoming European capital markets union.
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Market efficiency Return decomposition model Banking sector Insurance sector Risk management Solvency Rules and regulations Financial markets.