Corporate Diversification, Ownership, and Solvency in China’s Property-Liability Insurance Companies

Solvency is the premise of the sustainable management of insurance companies. Among factors that affect the solvency of insurance companies, diversification strategy is one that cannot be ignored. To study the impact of diversification on the solvency of property-liability insurance companies and how diversification will influence companies with different ownership, this paper adopts the dynamic panel GMM model and the unbalanced panel data from 2009 to 2015. The analysis is from two dimensions: product diversification and geographic diversification. Empirical study shows that product diversification will increase the solvency of Chinese-funded property-liability insurance companies but reduce the solvency of foreign-funded ones. As for the impact of geographic diversification on solvency, the more geographically diversified the premium income of Chinese-funded property-liability insurance companies are, the lower their solvency will be. However, geographical expansion has no significant solvency-related impact on foreign-funded property-liability insurance companies in China.