Multi-objective reference point techniques to optimize profitability, growth, and risk in the non-life insurance industry: international analysis

Abstract

This paper combines reference point techniques and econometric analyses to provide the profile of non-life insurers that simultaneously optimize the strategic growth, profitability, and risk goals. The econometric analyses provide the relevant relations among the variables. Non-life insurers from 33 Organisation for Economic Co-operation and Development countries over a six-year period are analyzed. A cluster analysis allows forming groups of countries according to the non-life insurance penetration ratio. Several scenarios, which are characterized by the maturity of the market and the crisis/non-crisis situation, are studied. The results indicate that the highest level of profitability (growth) is linked to scenarios with a medium (low) level of maturity and booming times. They also show that the lowest level of risk that is representative of good performance is associated with scenarios where markets have a high level of maturity and crisis times. We find that a higher recommendable size is associated with more mature markets. The results also indicate that reinsurance utilization is linked to a crisis time. We additionally find that the recommendable level of capitalization differs significantly among scenarios.