Analysis of Financial Stability of Insurance Companies

Insurance is a significant and integral part of any developed country economy. This financial institute is considered to be not only a guarantor of social and financial protection of the state and society, but also one of the most important investment instrument. Under unfavorable economic conditions and tight control of supervisory authorities, insurers need to carefully evaluate their financial sustainability. The one way to get such assessment is to calculate the likelihood of losing financial stability. The purpose of this work was to analyze the financial stability of Russian insurance organizations and to build a model that allows to identify the most significant characteristics of insurer solvency. For the purpose of achieving the goal, the following tasks were performed: the current state of the insurance market was analyzed, the issue of assessing financial stability was investigated, the coefficient and regression analysis was implemented for the twenty largest Russian non-life insurance companies. According to the coefficient analysis results, approximately 56% of the considered observations were characterized as stable. The result of the regression analysis was the construction of the logistic model that assesses the likelihood of financial instability of the company. The most significant factors were the same: Equity level, Combined loss ratio, Reinsurance, Liquidity, Leverage and Authorized capital. The obtained results can be practically applied for calculation the probability of financial instability of the insurance company.