The effect of SSAP 101 on loss provisioning by property-casualty insurers
This paper examines whether the adoption of the Statement of Statutory AccountingPrinciples (SSAP) 101, a new accounting standard that significantly limits management’sdiscretion in both the recognition and measurement of tax contingencies, affects the lossprovisions of property-casualty (PC) insure...
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| Main Authors: | , , , |
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| Format: | text |
| Language: | English |
| Published: |
Institutional Knowledge at Singapore Management University
2018
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| Subjects: | |
| Online Access: | https://ink.library.smu.edu.sg/soa_research/1791 https://ink.library.smu.edu.sg/context/soa_research/article/2818/viewcontent/AC19P5011_The_Effect_of_SSAP_101_on_Loss_Provisioning_by_Property_Casualty_Insurers.pdf |
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| Institution: | Singapore Management University |
| Language: | English |
| Summary: | This paper examines whether the adoption of the Statement of Statutory AccountingPrinciples (SSAP) 101, a new accounting standard that significantly limits management’sdiscretion in both the recognition and measurement of tax contingencies, affects the lossprovisions of property-casualty (PC) insurers. We find that PC insurers significantly reducetheir loss provisions after SSAP 101 adoption, particularly those with greater ex anteexposure to SSAP 101, consistent with reduced incentives to establish loss reserves for taxpurposes. Additionally, PC insurers with greater exposure to SSAP 101 show increasedearnings persistence and decreased returns on asset volatility, suggesting improved insurertransparency and an improved overall risk profile via tax avoidance mitigation. Overall, ourstudy offers important insight into the economic effects of accounting standards in theinsurance industry. |
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