Investigating the effect of risk on the return on insurance industry in the Iranian economy using the application of ARIMA-GARCH/TARCH models and beta coefficient.

A study of the movement of returns in the insurance industry reveals that income returns exhibited lower volatility compared to the overall movement of the industry. The lower income returns, relative to the movements of paid losses in the insurance industry, can be attributed to various variables, including insurance industry management, particularly risk recognition. Risk recognition assists managers in the insurance industry in assessing tolerable and intolerable risks when accepting or rejecting various insurance risks. Effective risk management plays a significant role in marketing, increasing the demand for insurance, and promoting the optimal growth of the insurance industry. This study evaluates the impact of risk on the return of the insurance industry in the Iranian economy from 1971 to 2019, utilizing generalized conditional autoregression models, ARIMA-GARCH/TARCH models, and the beta coefficient. The results indicate a significant relationship between the study of risk impact and the return of the insurance industry. Additionally, systematic risk is investigated using the beta coefficient method. The obtained beta coefficient, which is less than one but greater than zero, indicates that the income of the insurance industry is smaller than the general market movement trend, implying that risk aversion negatively affects the income return of the insurance industry.