Determinants of property-liability insurer retention: Evidence from Taiwan insurance industry

The determination of an appropriate retention level is an important decision for insurers since the results show the influence on risk exposure and firm profitability. In this study, we examine the determinants of insurer retentions for property-liability insurance companies in the Taiwan insurance industry. Three models are estimated in this study including ordinary least squares regression and two panel data models, fixed effects model and random effects model. The results show underwriting risk, premium growth and listed companies are negatively related to insurer retention, while liabilities to liquidity assets ratio and business concentration have a positive impact on insurer retention. In addition, when macroeconomic factors are taken into account, we also find that they have significant influence of return on investment, inflation rate and interest rate changes on insurer retention. Our results have practical implications for the property-liability insurance operational business and competent authorities.