Insurer profitability in different regulatory and legal environments

This paper examines the variation in insurance company financial performanc e across states with different legal and regulatory environments. These env ironments are distinguished by a diverse set of measures created by the sta tes to address problems in the insurance area. Using firm-level financial d ata for the period 1984-1991, quantile regression methodology is used to de scribe the differential relationships between profitability and these measu res. The results indicate that the distribution of profitability is only we akly related to insurers' regulatory and legal environments, and is signifi cantly related to other factors, such as the size of the firm and the effec tive number of competitors.