| Abstract [eng] |
Financial Stability Assessment of Insurance Companies This paper is aimed to investigate and determinate main indexes of financial stability of insurance companies and to create one complex index that could be used to evaluate and compare insurance companies’ financial stability. To achieve the objectives of this paper four main task were created: investigate how insurance companies and insurance sector financial stability contributes to overall economy and why it is important; determine what objectives has effect on insurance company financial stability; analyse methods to evaluate insurers financial stability; create index, which would include multiple variables and which would be suitable to evaluate insurance company financial stability. To reach main objective a number of methods were used: descriptive and quantitative analysis, analysis of other authors research on this topic (both insurance company and insurance sector financial stability), data – gathering and structuring, data analysis, ELECTRE IS method, principal component analysis (PCA). Based on the data of the financial statements of multiple non – life insurance companies in Baltic region for 2006 – 2018 and by using PCA method index was created. Index was created to evaluate non – life insurance company financial stability from the data that could be found in annual reports and from which seven indexes should be calculated (solvency, return on equity, combined ratio, provision ratio, current liquidity ratio, expense ratio and loss ratio). To test if created index evaluated financial stability of insurance company fairly and correctly, ELECTRE IS and simulation model was used – none of the methods had disconfirmed hypothesis that created index was correct. The study has showed that insurance company financial stability depends on multiple variables, which includes both internal factors (liquidity, quality of insurance package, losses and other) and external factors (sector specific, legal, social and political factors). Only some of the factors can be controlled or affected by insurers and that could be a result of significant difference when evaluating insurers financial stability, that is why it was needed to create index for a region with similar operating conditions for companies. This index could be used to evaluate and compare multiple non – life insurers financial stability in Baltic region and if this kind of index was calculated for other regions, it could be used to examine how different external factors affect insurers operating results. Also, this index could be upgraded if qualitative data was included in index calculation. |
