The Determinants of Credit Ratings in the United Kingdom Insurance Industry

Executive Summary The Determinants of Credit Ratings in the United Kingdom Insurance Industry Academic researchers have devoted a considerable amount of attention to the activities of credit rating agencies over the past 20 years, focusing in particular on the agencies’ potential role in overseeing corporate financial strength and promoting the efficient operation of financial markets. Examinations of credit rating practices has recently extended to the insurance industry, where the complex technical nature of market transactions leads to policyholders, investors and others facing particularly acute information asymmetries at the point-of-sale. Published credit ratings are therefore seen as helping to alleviate imperfections in insurance markets by providing a third party opinion on the adequacy of an insurer’s financial health and the likelihood of it meeting obligations to policyholders and others in the future. Although the United Kingdom (UK) insurance market is now one of the five largest in the world, relatively little is known about the practices of the major firms and policy-makers which influence its operations. In particular, whilst the determinants of rating agencies’ assessments of United States (US) insurers is well documented, published studies have yet to provide comprehensive evidence about insurance company ratings in the UK. This study attempts to fill this gap by examining the ratings awarded by two of the world’s leading agencies – A.M. Best and Standard and Poor (S&P) – and establishing the extent to which organizational variables can help predict: (i) insurance firms’ decision to be rated; and (ii) the assigned ratings themselves. Our sample of UK data comprises ratings made by A.M. Best and S&P over the period 1993-1997 for both life and property-liability insurers. The panel data we use is ordinal in nature and is therefore analysed using an ordered probit model. However, because neither A.M. Best or S&P rate the full population of UK insurance firms our data set is potentially subject to selfselection bias and we therefore extend the model to correct for such problems. In particular, the paper examines the effect of eight firm-specific variables (namely, capital adequacy, profitability, liquidity, growth, size, mutual/stockowner status, reinsurance level, and short/long-term nature of business) on the ratings awarded by the two agencies, as well as on insurance firms’ decisions to volunteer for the ratings in the first place. In general terms, our evidence concurs with earlier US findings, and suggests that although the decision to be rated by either of the agencies is largely influenced by a common set of factors, the determinants of the ratings themselves appear to differ. Specifically, our first main finding is that insurers’ decisions to be rated by either A.M. Best or S&P is positively related to surplus growth, profitability and leverage. Second, while we find that A.M. Best’s ratings are positively linked to profitability and liquidity, as well as being generally higher for mutual insurers, the findings for S&P differ substantially. Although liquidity again exerted a positive influence on assigned ratings, the only other statistically significant variable was financial leverage, which had a negative sign. We believe that the results of our research are of potential importance for companies operating in insurance markets as well as for policy-makers, brokers and others. For example, the evidence that mutual insurers are generally assigned higher ratings than stock insurers suggests that certain publicly-traded insurers, in particular new entrants, might not possess sound financial strength and may require closer regulatory scrutiny than other, more established, insurance firms. In addition, the finding that liquidity has a significantly positive effect on ratings assigned by two of the world’s leading credit agencies should provide a measure of confidence about the robustness of the ratings to industry regulators, policyholders and investors in the UK. This could imply that external ratings might eventually play a role in substituting for costly industry regulation. The study concludes that although the factors influencing the decision to be rated by A.M. Best or S&P are broadly the same, a degree of variability exists in the variables which influence the actual ratings themselves. Insurance company managers should be aware of this when contemplating whether to seek an independent rating and which agency to choose for the assessment. We therefore believe that this study fills an important gap in the literature about key players in the important UK insurance market and provides a basis for the conduct of future research

Information technology and visual impairment: New developments

No abstract available

Design at King Edward VII Community College, Leicestershire

King Edward VII is a 14-18Upper School in the Leicestershire Plan with approximately 95014-16 year old students. Design is part of the core curriculum and is taught to mixed ability groups. The Faculty is organised departmentally into 3D, 2D, and Home Economics and offers the following curriculum options to incoming 4th years: 3D Studies; 2D Studies (including Ceramics); Technical Graphics; Fabrics and Home Economics. Technology is taught as an option and jointly staffed by Science and Design. There are no traditional craft options, and the entire Faculty uses the MEG Jointly Certificated Design Syllabus as the basis of its courses

Learning faces from variability

Research on face learning has tended to use sets of images that vary systematically on dimensions such as pose and illumination. In contrast, we have proposed that exposure to naturally varying images of a person may be a critical part of the familiarization process. Here, we present two experiments investigating face learning with “ambient images”—relatively unconstrained photos taken from internet searches. Participants learned name and face associations for unfamiliar identities presented in high or low within-person variability—that is, images of the same person returned by internet search on their name (high variability) versus different images of the same person taken from the same event (low variability). In Experiment 1 we show more accurate performance on a speeded name verification task for identities learned in high than in low variability, when the test images are completely novel photos. In Experiment 2 we show more accurate performance on a face matching task for identities previously learned in high than in low variability. The results show that exposure to a large range of within-person variability leads to enhanced learning of new identities

Checking ID-cards for the sale of restricted goods : age decisions bias face decisions

Matching unfamiliar faces is highly error-prone, and most studies highlight the implications for real-world ID-checking. Here we study a particular instance of ID-checking: proof of age for buying restricted goods such as alcohol. In this case, checkers must establish that an identity document is carried by its legitimate owner (i.e., that the ID photo matches the face of the bearer) and that the ID proves the bearer to be old enough to make the purchase. Across three experiments, using two common forms of photo-ID (i.e., driving licenses, PASS+ cards) we show that observers produce very high error rates when age requirements are met, but faces mismatch. This bias away from detecting a face mismatch remained evident in experienced cashiers—though to a somewhat attenuated level. We discuss interactions between face matching and other tasks, and the practical consequences of a bias which favours those using photo-ID with fraudulent intent

Differential absorption lidar for volcanic CO(2) sensing tested in an unstable atmosphere.

Motivated by the need for an extremely durable and portable instrument to quantify volcanic CO2 we have produced a corresponding differential absorption lidar (DIAL). It was tested on a volcano (Vulcano, Italy), sensing a non-uniform volcanic CO2 signal under turbulent atmospheric conditions. The measured CO2 mixing ratio trend agrees qualitatively well but quantitatively poorly with a reference CO2 measurement. The disagreement is not in line with the precision of the DIAL determined under conditions that largely exclude atmospheric effects. We show evidence that the disagreement is mainly due to atmospheric turbulence. We conclude that excluding noise associated with atmospheric turbulence, as commonly done in precision analysis of DIAL instruments, may largely underestimate the error of measured CO2 concentrations in turbulent atmospheric conditions. Implications for volcanic CO2 sensing with DIAL are outlined. © 2015 Optical Society of America

A new frontier in CO₂ flux measurements using a highly portable DIAL laser system

Volcanic CO(2) emissions play a key role in the geological carbon cycle, and monitoring of volcanic CO(2) fluxes helps to forecast eruptions. The quantification of CO(2) fluxes is challenging due to rapid dilution of magmatic CO(2) in CO(2)-rich ambient air and the diffuse nature of many emissions, leading to large uncertainties in the global magmatic CO(2) flux inventory. Here, we report measurements using a new DIAL laser remote sensing system for volcanic CO(2) (CO(2)DIAL). Two sites in the volcanic zone of Campi Flegrei (Italy) were scanned, yielding CO(2) path-amount profiles used to compute fluxes. Our results reveal a relatively high CO(2) flux from Campi Flegrei, consistent with an increasing trend. Unlike previous methods, the CO(2)DIAL is able to measure integrated CO(2) path-amounts at distances up to 2000 m using virtually any solid surface as a reflector, whilst also being highly portable. This opens a new frontier in quantification of geological and anthropogenic CO(2) fluxes

The Effects of Nutrition Package Claims, Nutrition Facts Panels, and Motivation to Process Nutrition Information on Consumer Product Evaluations

In a laboratory experiment using a between-subjects design, the authors examine the effects on nutrition and product evaluations of nutrition claims made (e.g., 99% fat free; low in calories ) on a product package, product nutrition value levels, and enduring motivation to process nutrition information. Enduring motivation is shown to moderate the effects of product nutrition value on consumer evaluations. Also, nutrition claims interact with product nutrition value in affecting consumer perceptions of manufacturer credibility. Given the availability of nutrient levels in the Nutrition Facts panel on the back of the mock package, nutrition claims on the front of the package generally did not affect positively consumers\u27 overall product and purchase intention evaluations. The authors discuss some implications of these findings, suggestions for further research, and study limitations

Matching face images taken on the same day or months apart : The limitations of photo ID

Summary: It is well-established that matching images of unfamiliar faces is rather error prone. However, there is an important mismatch between face matching in laboratory and realistic settings. All of the currently available face-matching databases were designed to establish the baseline level of unfamiliar face perception. Therefore, target and test images for each face identity have been taken on the same day, minimizing within-face variations. In realistic settings, on the other hand, faces do vary, even day to day. This study examined the proficiency of matching images of unfamiliar faces, which were taken on the same day or months apart. In two experiments, same-day images were matched substantially more accurately and faster than different-date photographs using the standard 1-in-10 and pairwise face-matching tasks. This suggests that experimental studies on face matching underestimate its difficulty in real-world situations. Photographs of unfamiliar faces seem to be unreliable proofs of identity, especially if the ID documents do not use very recent images of the holders