CORPORATE INSURANCE AND DEBT CAPACITY: EMPIRICAL EVIDENCE FROM ITALY

In the current economic phase, characterized by the difficulty of firms to obtain financing, a key role in banks/enterprises relations is played by Basel II Framework, which accurately correlates banks’ capital requirement to risks, thanks to a more precise creditworthiness assessment (Tarantola, 2008). The containment of risks inherent in bank financing can be carried out ex ante, through an adequate screening, which allows the proper assessment of enterprises’ economic and financial situation and a sound composition of the total loan portfolio, and ex post, through guarantees, which allow to benefit from a loss reduction only after insolvency has occurred (Boot et al., 1991; Erzegovesi, 2007, 2008; Gai, 2005, 2006; Malinconico, 2000, 2008; Stiglitz, Weiss, 1981, 1986). From this perspective, Basel II Framework brings important changes, since life insurance and surety policy are “eligible” guarantees for Credit Risk Mitigation. Nevertheless, banks could offer a better pricing to borrowers not because they are less risky, but because the whole operation would need a lower capital requirement. Therefore, corporate risks reduction – which would allow, in the absence of credit rationing, a more profitable debt capacity – is necessarily achieved through an appropriate “umbrella insurance”, able to cope with both direct and indirect loss. The “therapeutic” capacities of such coverages lead to a synallagmatic relation between corporate insurance purchases and increase in enterprises’ creditworthiness, since enterprises’ risk management decreases their overall riskiness and improves their creditworthiness (Mayers, Smith, 1982; Thakor, 1982; Davidson et al., 1992; Zou, Adams, 2008, 2009; Ania, Irsa, 2010). In the economic literature there is a lack of attention about the capability of the insurance system to favour debt capacity by enterprises. Therefore, this work aims at investigating the existence of a “virtuous” relation between corporate insurance purchases, credit risk and debt capacity. Such aim can be pursued through different steps: A. review of literature, to identify the reasons of corporate demand for insurance; B. analysis of Italian enterprises’ corporate insurance purchases; C. drafting of a questionnaire, to submit to a sample of the main banks working in Italy, intended to investigate whether and how the possession of corporate insurance is taken into consideration in the determination of enterprises’ creditworthiness; D. drafting of a questionnaire, to submit to a sample of the main insurance companies working in Italy, intended to identify what kind of role they play in the relation with enterprises and which insurance products they offer.