This paper investigates whether the setting of loss reserves depends on an insurer’s complexity, which is defined by the number of business lines an insurer underwrites and on the insurer’s expertise in those lines. Our results suggest that insurers with higher levels of complexity tend to over-reserve. We also find that, as complexity increases, insurers that are financially weak and smooth their earnings, tend to under-reserve (i.e., bias their loss reserves upward). Further, we find that as complexity increases, insurers with high tax liabilities tend to bias their loss reserves downward (i.e., over-reserve), suggesting that tax strategies are important issues for insurers. An insurer’s degree of complexity is particularly salient when determining the extent to which loss reserves can be aggressively set.

中文翻译：

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财产险行业复杂性与管理自由度的关联

本文调查了损失准备金的设置是否取决于保险公司的复杂性，复杂性由保险公司承保的业务线数量以及保险公司在这些业务线的专业知识决定。我们的研究结果表明，复杂程度较高的保险公司往往会过度准备金。我们还发现，随着复杂性的增加，财务状况不佳且收益平稳的保险公司往往准备金不足（即，将损失准备金向上倾斜）。此外，我们发现随着复杂性的增加，具有高税收负债的保险公司倾向于将其损失准备金向下倾斜（即过度准备金），这表明税收策略是保险公司的重要问题。在确定可以积极设定损失准备金的程度时，保险公司的复杂程度尤为突出。