Marir, Imene and Asma, Salhi (2024): Determinants of financial solvency in Algerian insurance companies: an econometric analysis using ardl. Published in: Science, Education and Innovations in the Context of Modern Problems , Vol. 8, No. 1 (17 March 2025): pp. 500-521.
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Abstract
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.
Item Type: | MPRA Paper |
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Original Title: | Determinants of financial solvency in Algerian insurance companies: an econometric analysis using ardl |
Language: | English |
Keywords: | Financial Solvency Margin, Solvency Determinants, Insurance Companies, Algerian Solvency System, ARDL. |
Subjects: | E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models H - Public Economics > H0 - General > H00 - General O - Economic Development, Innovation, Technological Change, and Growth > O2 - Development Planning and Policy |
Item ID: | 124126 |
Depositing User: | Rahil Rahil Najafov |
Date Deposited: | 01 Apr 2025 06:13 |
Last Modified: | 01 Apr 2025 06:13 |
References: | 1.Adams, M., & Jiang, W. (2019). The impact of financial performance on solvency margins in insurance companies. Journal of Risk and Insurance, 86(4), 945-970. https://doi.org/10.1111/jri.12345 2.Ahmed, R., & Azim, M. (2020). Solvency risk and financial stability in the insurance industry. International Journal of Finance & Economics, 25(3), 235-250. https://doi.org/10.1002/ijfe.1805 3.Alhassan, A. L., & Fiador, V. (2014). Insurance penetration and economic growth. International Journal of Business and Economics, 19(2), 123-135. 4.Baranoff, E. G., & Sager, T. W. (2021). The role of investment income in solvency management. Risk Management and Insurance Review, 24(1), 45-72. https://doi.org/10.1002/rmir.2001 5.Beck, T., & Webb, I. (2018). Determinants of insurance sector performance. World Development, 99, 1-15. https://doi.org/10.1016/j.worlddev.2017.09.005 6.Cummins, J. D., & Phillips, R. D. (2017). Solvency regulation in insurance markets. Journal of Financial Services Research, 51(2), 123-150. https://doi.org/10.1007/s10693-017-0283-9 |
URI: | https://mpra.ub.uni-muenchen.de/id/eprint/124126 |