Economic Crisis and Determinants of Solvency in the Insurance Sector: New Evidence from Spain
Accounting and Finance, 2020, 60(3), pp. 2965–2994
Posted: 30 Apr 2018 Last revised: 8 Jul 2021
Date Written: October 28, 2018
Abstract
This paper analyzes the factors that determine the solvency of the insurance companies operating in Spain. The selected time span, from 2008 to 2015, encompasses a period of economic instability characterized by record low interest rates and low or even negative economic growth. Using a dynamic panel data model, we conclude that actual solvency margins are positively related to profitability, underwriting risk, and a mutual-type organization but inversely related to size, reinsurance use, longer-tailed business, and life insurance specialization. We also find that less concentrated markets and the context of an economic crisis decrease solvency margins.
Keywords: Insurance, Solvency, Capitalization, Economic Crisis, European Financial System
JEL Classification: G22, G28, G32, G33
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