Determinants of Cash Holdings by Property-Liability Insurers

This study investigates the differences in cash holdings across property-liability insurers. We conclude that relative cash holdings are less for insurers with better access to cash through capital markets and/or other group members. We also conclude that larger insurers, higher quality insurers, insurers that write longer tail lines of business, and firms with higher degrees of cash flows tend to hold more cash. Another interesting finding is that, contrary to what managerial discretion arguments might suggest, stock insurers tend to hold more cash than do mutuals.