I need to support these results by theoretical and empirical discussion from the previous study - Thesis Example

In practice also, an empirical study by Professor Michael R. Powers and Martin Shubik seems to suggest that for any given nation or region such as the GCC, the positional market should be approximated to be equated to the square-root of the number of primary insurers in that given active market (Bennaceur and Goaied, 2001). What this also seem to suggest is that the number of primary insurers in an active market is always instrumental to the reinsurance dependence that will bring about total returns, which includes stock returns.

Whiles this remains a valid argument, the correspondence between reinsurance dependence and stock returns in GCC insurance companies can easily be judged as either being positive or negative and whether the relationship is significant or insignificant. Looking critically at the GCC as a regional market, it can be realized that the major motive behind ceding companies in their reinsurance bids have had to do with a need to exchange insurance risk for credit risk. Because of this, there is always much care in ensuring that the reinsurer has an optimistic financial rating.

Meanwhile, the chat below shows that as far as the total gross written premiums of insurance companies for the past 4 years are concerned, there have been significant rise across the entire GCC. What this means is that ceding companies always have enough grounds to bid into reinsurance, knowing that there are favorable financial rating. On the part of the reinsurers however, they would certainly benefit from as much increased stock returns as there are increases in the premiums. This positive relation is however described to be insignificant as this has not led to growth in primary business (Judge, et al, 2000) as the backbone of the reinsuring trade deals.

A well articulated discussion on the relationship that presently exists between affiliated investment and stock returns in GCC insurance companies could best be outlined if the discussion is taken from the