Effects of natural calamities on the probability of exit insurance companies using the Probit Analysis model, 1991-2010

The Philippines, as an archipelago, is severely exposed to a wide range of recurrent natural calamities. Insurance companies then bear these types of risk exposures that are often described as low frequencies, maximum uncertainty, and economic losses. The research study documented the effects of the occurrence of unexpected calamities to the financial aspect of insurance companies. Moreover, aside from showing how insurance companies would adapt to the possible loss when a natural calamity occurs, this research study also tackled the probability of exit of insurance companies in the industry when a catastrophic calamity occurs. As this study would be the analysis of the existence of a relationship between insurance companies and natural calamities that had happened in the Philippines, a series models, namely, four panel regression models and a probit analysis model was used for the study. The prior model shows the relation of the variables, total premiums for the state, specific non-life premiums, and unexpected calamities, with loss ratios, premiums, and losses. The latter model was then conducted to analyze the probability of exit of these insurance companies after natural calamities, where the predictor variables are premiums collected and unexpected calamities. As this research study was supposed to prove an existent relationship between insurance companies and natural calamities, it was concluded that it had no effect particularly in the exit of insurance companies. Instead, the state premiums and premiums are the ones that influence the survivability of insurance companies