LIFE INSURER FINANCIAL DISTRESS - CLASSIFICATION MODELS AND EMPIRICAL-EVIDENCE

This study extends previous research on life insurer insolvency by pro viding empirical evidence on a large (nonmatched-pair) sample of insur ers based on three alternative types of statistical models. The study utilizes 1986 through 1990 data for a sample of insurers that did or d id not become financially impaired during 1989 through 1991. Empirical evidence suggests that surplus measures and leverage measures are str ong indicators of insurer financial strength; however, no evidence is found for a strong relationship between state minimum capital requirem ents and insolvency. Classification rates for this study's large sampl e are generally lower than those found in previous studies examining e arlier time periods and using smaller, matched-pair samples.