IDEAS home Printed from https://ideas.repec.org/a/vrs/ecobus/v32y2018i1p102-111n8.html
   My bibliography  Save this article

Assessment of the Stability of Insurance Companies: The Case of Baltic Non-Life Insurance Market

Author

Listed:
  • Zariņa Ilze

    (Riga Technical University, Riga, Latvia)

  • Voronova Irina

    (Riga Technical University, Riga, Latvia)

  • Pettere Gaida

    (Technical University, Riga, Latvia)

Abstract

The study gives an overview of the Baltic non-life insurance market. The purpose of the research is to summarise stability statistics on solvency ratios, risk profiles and capital surplus, which was contained in Solvency and Financial Condition reports (SFCR) in 2016 published first time by non-life insurance companies in European Union and Baltic market (Latvia, Estonia, and Lithuania). Solvency II came into effect in 2016, and these reports have been prepared using the new requirements of the Solvency II framework. All non-life insurance companies are required to have eligible own funds at least equal to solvency capital requirement (SCR) in order to avoid supervisory intervention (own funds divided by SCR are required to be at least 100 %). The SCR is based on well known risk measure value at risk with 99.5 % confidence level over a one-year time horizon. Baltic non-life insurance companies were strong capitalized (median 155 %) in 2016. It means that all Baltic companies can survive even if 1 in 200 years events have occurred although Baltic solvency coverage ratio is lower than the median ratio in European Union (209 %). For Latvian non-life insurance market, solvency ratio median is the lowest in European Union comparing by countries. The authors have analysed the historical development of the market and have calculated financial ratios, Gini’s concentration index, as well as dissimilarity index. The authors have investigated the current and future internal and external risks and issues for the Baltic non-life insurance market, such as political environment, low-yield environment, and market competition due to new mergers and acquisitions (M&A) activities, and a new rule for accounting for insurance companies IFRS17.

Suggested Citation

  • Zariņa Ilze & Voronova Irina & Pettere Gaida, 2018. "Assessment of the Stability of Insurance Companies: The Case of Baltic Non-Life Insurance Market," Economics and Business, Sciendo, vol. 32(1), pages 102-111, May.
    • Handle: RePEc:vrs:ecobus:v:32:y:2018:i:1:p:102-111:n:8
    DOI: 10.2478/eb-2018-0008
    as

    Download full text from publisher

    File URL: https://doi.org/10.2478/eb-2018-0008
    Download Restriction: no
    File URL: https://libkey.io/10.2478/eb-2018-0008?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. J. David Cummins & Richard D. Phillips, 2005. "Estimating the Cost of Equity Capital for Property‐Liability Insurers," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 72(3), pages 441-478, September.
    2. John Chant & Alexandra Lai & Mark Illing & Fred Daniel, 2003. "Essays on Financial Stability," Technical Reports 95, Bank of Canada.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ilyes Abidi & Mariem Nsaibi & Boutheina Regaieg, 2020. "Challenges of Islamic Insurance," International Journal of Economics and Financial Issues, Econjournals, vol. 10(4), pages 69-79.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kremen Viktoriia & Shkolnyk Inna & Semenog Andrii & Kremen Olha, 2019. "Evaluating the Relationship Between Financial Sustainability and Socio-Economic Development of Countries," Central European Economic Journal, Sciendo, vol. 6(53), pages 25-38, January.
    2. J. François Outreville, 2013. "The Relationship Between Insurance and Economic Development: 85 Empirical Papers for a Review of the Literature," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 16(1), pages 71-122, March.
    3. CRISTE, Adina, 2014. "Reference Points For Financial Instability In The Euro Zone Candidates Countries," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 18(3), pages 58-75.
    4. Ben Ammar, Semir & Eling, Martin & Milidonis, Andreas, 2015. "Asset Pricing of Financial Insitutions: The Cross-Section of Expected Stock Returns in the Property/Liability Insurance Industry," Working Papers on Finance 1516, University of St. Gallen, School of Finance.
    5. John A. Major & Stephen J. Mildenhall, 2020. "Pricing and Capital Allocation for Multiline Insurance Firms With Finite Assets in an Imperfect Market," Papers 2008.12427, arXiv.org.
    6. Barnes, Michelle L. & Lopez, Jose A., 2006. "Alternative measures of the Federal Reserve Banks' cost of equity capital," Journal of Banking & Finance, Elsevier, vol. 30(6), pages 1687-1711, June.
    7. International Monetary Fund, 2004. "Toward a Framework for Safeguarding Financial Stability," IMF Working Papers 2004/101, International Monetary Fund.
    8. Michał Buszko & Witold Orzeszko & Marcin Stawarz, 2021. "COVID-19 pandemic and stability of stock market—A sectoral approach," PLOS ONE, Public Library of Science, vol. 16(5), pages 1-26, May.
    9. Garry J. Schinasi, 2009. "Defining Financial Stability and a Framework for Safeguarding It," Working Papers Central Bank of Chile 550, Central Bank of Chile.
    10. Fred Lazar & Eliezer Z. Prisman, 2015. "Regulator's Determination of Return on Equity in the Absence of Public Firms: The Case of Automobile Insurance in Ontario," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 18(2), pages 199-216, September.
    11. Malgorzata Mikita, 2022. "The Interrelationship Among Efficiency and Concentration of Banking System and its Stability: Evidence from Poland," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 670-689.
    12. J. Cummins & Xiaoying Xie, 2013. "Efficiency, productivity, and scale economies in the U.S. property-liability insurance industry," Journal of Productivity Analysis, Springer, vol. 39(2), pages 141-164, April.
    13. Garry J. Schinasi, 2011. "Defining Financial Stability and Establishing a Framework to Safeguard It," Central Banking, Analysis, and Economic Policies Book Series, in: Rodrigo Alfaro (ed.),Financial Stability, Monetary Policy, and Central Banking, edition 1, volume 15, chapter 3, pages 029-062, Central Bank of Chile.
    14. Dionne, Georges & Harrington, Scott, 2017. "Insurance and Insurance Markets," Working Papers 17-2, HEC Montreal, Canada Research Chair in Risk Management.
    15. J. François Outreville, 2011. "The relationship between insurance growth and economic development - 80 empirical papers for a review of the literature," ICER Working Papers 12-2011, ICER - International Centre for Economic Research.
    16. J. David Cummins & Olivier Mahul, 2009. "Catastrophe Risk Financing in Developing Countries : Principles for Public Intervention," World Bank Publications - Books, The World Bank Group, number 6289.
    17. Shirasu Yoko & Komoribayashi Katsuya & Moridaira Soichiro, 2009. "Estimation of Capital Beta and Cost of Capital: A Focus on Japanese Property-liability Insurance Companies and Lines of Business," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 3(2), pages 1-18, April.
    18. repec:wsr:wpaper:y:2015:i:145 is not listed on IDEAS
    19. Sabine Lemoyne de Forges & Ruben Bibas & Stéphane Hallegatte, 2001. "A dynamic model of extreme risk coverage : Resilience and e fficiency in the global reinsurance market," CIRED Working Papers halshs-00800460, HAL.
    20. Yu‐Luen Ma & Nat Pope & Xiaoying Xie, 2014. "Contingent Commissions, Insurance Intermediaries, and Insurer Performance," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 17(1), pages 61-81, March.
    21. Ben Ammar, Semir & Eling, Martin & Milidonis, Andreas, 2018. "The cross-section of expected stock returns in the property/liability insurance industry," Journal of Banking & Finance, Elsevier, vol. 96(C), pages 292-321.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vrs:ecobus:v:32:y:2018:i:1:p:102-111:n:8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.sciendo.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.