The effects of underwriting and reserving techniques in insurance of ship financing

The subject of this thesis is the effect of underwriting and reserving techniques in insurance of ship finance and based on this approach to analyzing insurer financial risks. We focus on a very specific application of actuarial science – to propose a new dynamic tool to the risk management industry for calculating probabilities of default and the relationship between underwriting and reserving risks which define the premium for ship finance insurance companies. Insurance is included in shipping finance is crucial for the financier for the financier to obtain as little credit as possible and we examine how the financing ship is sufficiently protected by the ship finance insurance. The main idea behind presenting this thesis is to propose a dynamic approach which can be widely used in ship finance insurance for obtaining probability of default. My approach delivers confidence intervals for the probability of defaults of each rating grade. The probability of default range can be adjusted by the choice of an appropriate confidence level. Based on a sample of 298 listed shipping companies in the world, we analysis whether they follow a target capital structure and examine the dynamics of capital structure changes succeeding to distresses in leverage. We have analyzed the financial information based on the results ending at companies' fiscal year of all shipping companies since 2011 till at the end of 2016, according to their financial statements. Ratios of complexity provide a view of the profitability in terms of percentages. This will be useful when comparing firms and default ratios over time within shipping industry.