Assessment of factors affecting the solvency of property-liability insurance companies

Abstract

Purpose. This study aims to determine the effect of company size, investment return ratio, own-retention ratio and underwriting results on both the solvency ratio based on technical provisions (YTP), and the solvency ratio based on net premiums (YNP) of 12 property-liability (P/L) insurance companies in Algeria during 2018–2021. This study uses the multiple regression analysis with the help of the SPSS program. Results. The results of this study indicate that the underwriting results have a positive and significant effect on YTP of P/L insurance companies in Algeria during 2018–2021, while other variables do not affect YTP. This study also states that the own-retention ratio and underwriting results have a significant positive influence on YNP of P/L insurance companies in Algeria during 2018–2021, however the company size and investment return ratio do not affect YNP of these companies. The developed models explain only 32.4 % of the variation in dependent variable (YTP) and 61.7 % of the variation in dependent variable (YNP), implying that there are still other factors affecting solvency of P/L insurance companies in Algeria. Scientific novelty. The scientific novelty of this research lies on knowing the factors affecting the solvency of insurance companies by focusing on Algeria, especially since the Algerian solvency system is still purely traditional and does not focus on the factors considered in this study. Practical value. The findings will enable insurance companies in Algeria to optimally evaluate their solvency by focusing on the factors that have a significant effect on the solvency of insurance companies, thus ensuring the sustainability of these companies. Furthermore, the results of this study could be assistance to the insurance regulatory authority in Algeria to reconsider the rules of regulating solvency based on the factors that affect insurer’ solvency.

Keywords

• insurance company
• solvency
• company size
• investment return ratio
• own-retention ratio
• underwriting result
• algeria.