Determinants of financial solvency in Algerian insurance companies: an econometric analysis using ardl

This study aims to investigate the determinants of financial solvency for Algerian insurance companies and the strength and direction of their impact on the solvency margin of these companies. This was done by constructing an econometric model of financial solvency and its influencing variables using the Autoregressive Distributed Lag (ARDL) methodology with Eviews 12 software for the period 1998–2021. The study found that the determinants of solvency—namely, insurance premiums, compensation, financial investments, and technical provisions—maintain a long-term equilibrium relationship with financial solvency. The findings revealed that a 1% increase in insurance premiums, financial investments, and technical provisions will lead to an increase in the financial solvency margin by 1.75%, 0.38%, and 0.78%, respectively, in the long term. Moreover, the study identified a long-term inverse relationship between compensation and the financial solvency margin, where a 1% increase in compensation results in a 1.79% decrease in the financial solvency margin. Additionally, the study found that any 1% shock to solvency determinants will have a lasting impact for one year and seven months before returning to its normal equilibrium state.