A Discriminant Analysis of Insurance Companies in Ukraine

Financial Markets, Institutions and Risks, January 2017

9 Pages Posted: 8 Feb 2019

See all articles by Viktoriia Riashchenko

Viktoriia Riashchenko

ISMA (Informācijas Sistēmu Menedžmenta Augstskola)

Viktoriia Kremen

affiliation not provided to SSRN

Tetiana Bochkarova

Sumy State University

Date Written: January 2, 2017

Abstract

Determining and forecasting the financial situation of insurance companies of Ukraine has become an important issue of financial supervision in view of the need to ensure the sustainability of the financial sector and reduce the negative impact of the insolvency of insurance companies. Given the significant number of bankruptcies of insurance companies in Ukraine in recent years, a discriminatory method may be applied to improve off-site financial supervision. The paper analyzes the advantages and disadvantages of discriminatory models developed for companies producing goods and providing non-financial services to banking institutions and insurance companies. It is substantiated that in order to improve the quality of estimation and forecasting of the financial state of insurance companies in Ukraine, the development of a discriminant model should take into account the domestic specificity of the insurance business. The scientific work defines the stages of development and testing of the quality of a discriminant model for determining the financial status of insurance companies in Ukraine. For the development of a discriminant model, taking into account the existing statistical base, 31 indicators of activity of 12 insurance companies for 2015 were selected. The selection of statistical indicators for use as factors in a discriminant model was performed on the basis of a two-choice F-test, a Farrar-Globard algorithm, a matrix of pair coefficients of correlation. A discriminatory model for determining the financial status of insurance companies in Ukraine included net returns on equity, asset turnover ratios, insurance risk rates, and changes in equity. The application of the model allows you to determine whether the insurance company has a satisfactory or unsatisfactory financial condition. Approval of the developed discriminant model has proven its high quality.

Keywords: insurance company, financial status, discriminatory analysis, discriminatory function

JEL Classification: C15, C35, G22, G33, M21

Suggested Citation

Riashchenko, Viktoriia and Kremen, Viktoriia and Bochkarova, Tetiana, A Discriminant Analysis of Insurance Companies in Ukraine (January 2, 2017). Financial Markets, Institutions and Risks, January 2017, Available at SSRN: https://ssrn.com/abstract=3323876

Viktoriia Riashchenko

ISMA (Informācijas Sistēmu Menedžmenta Augstskola)

Lomonosov 1, Housing Sixth, LV-1019
Riga
Latvia

Viktoriia Kremen

affiliation not provided to SSRN

Tetiana Bochkarova (Contact Author)

Sumy State University ( email )

Rymskyi-Korsakov str., 2
Sumy, 40000
Ukraine

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