Economic Policy Uncertainty and Risk-Taking Behavior in the Insurance Industry: A Multi-Method Panel Analysis | ||
| مجلة البحوث المالية والتجارية | ||
| Volume 26, Issue 4 - Serial Number 1, October 2025, Pages 890-922 PDF (1.55 M) | ||
| Document Type: المقالة الأصلية | ||
| DOI: 10.21608/jsst.2025.421503.2113 | ||
| Authors | ||
| اسلام صيام* 1; محمد رفعت حامد اسماعيل2 | ||
| 1كلية التجارة- جامعة الزقازيق كلية الاعمال - جامعة الامام محمد بن سعود الاسلامية | ||
| 2جامعة سوهاج | ||
| Abstract | ||
| The insurance sector, being a key financial intermediary and risk absorber, faces specific challenges to operate within uncertain policy regimes that impact both their underwriting decisions and their investment conduct. This paper investigates the impact of economic policy uncertainty on risk-taking behavior on multiple dimensions of insurance firm operations, filling an important gap in the extant literature on the differential impact of uncertainty on underwriting and investment conduct. Using a complete panel dataset on 11 Egyptian insurance firms from 2009-2024, amounting to 176 firm-year firm years, we apply three complementary panel-based econometric methods: fixed effects panel regression, seemingly unrelated regression systems, and first-difference generalized method of moments estimation. The empirical results indicate asymmetric reactions to economic policy uncertainty on risk channels. The estimates indicate economic policy uncertainty significantly enhances underwriting risk exposure, with statistically significant estimates when dealing with heteroskedasticity concerns using robust standard errors. Investment risk is found largely unchanged across multiple estimates, registering consistently negative though statistically insignificant estimates. The estimates exhibit economically significant magnitudes and remain stable across numerous panel-based econometric estimations and tests on specification. The findings indicate insurance firms react to economic policy uncertainty by risk-taking through their core underwriting activities potentially due to the forces of competition and search-for-yield conduct, while adopting conservative approaches to their investments due to regulatory pressures and liability-matching requirements. The findings carry significant regulatory implications that prudential regulations should include policy uncertainty indicators and employ differential approach-based monitoring mechanisms on underwriting and investments when there is heightened policy uncertainty. | ||
| Keywords | ||
| Economic Policy Uncertainty; Panel Data Analysis; Fixed Effects; Seemingly Unrelated Regression | ||
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