Insurance and Issues in Financial Soundness

Das, Udaibir; Davies, Nigel; Podpiera, Richard

doi:10.2139/ssrn.879214

Cited by 8 publications

(7 citation statements)

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“…As expressed by (Bustic, 1994), the degree of correlation of risk elements is a critical factor in setting the capital requirement. Das et al (2003) argue that riskbased capital model is a superior technique from a theoretical point of view and thus reflect more precisely the overall firm's risk exposure.…”

Section: Discussionmentioning

confidence: 99%

Analysis of the Impact of Solvency Capital on Efficiency: Evidence from Takaful Firms in GCC Region

Asafa¹,

Hamid²

2016

HSS

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The minimum solvency capital regulatory standards introduced by insurance sector’s supervisory authorities in the GCC region aimed at protecting and reshaping the takaful takaful industry against adverse effects of global financial crisis as well as other unanticipated socio-economic challenges have attracted different reactions and comments from the sector’s stakeholders. While the intent may be commendable, concerns are raised by some stakeholders that compliance with this regulation may stifle operation efficiency of these companies. This paper investigates the impact of solvency capital on efficiency of takaful companies in the GCC region. The mathematical programming non–parametric data envelopment analysis (DEA) with range adjustment measures (RAM) model is employed for the analysis due to its desirable properties compared to other DEA models. The outcome of DEA analysis is subjected to diagnostic statistical test using Wilcoxon sign ranked statistical test to determine the impact of solvency capital proxy on efficiency score. Solvency condition is model to reflect adjustment to two distinct circumstances, namely management and regulatory positions. Result shows that the adjustment behaviors of takaful companies to solvency conditions affect the efficiency at different period and thus reflects both management and regulatory positions.

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Section: Discussionmentioning

confidence: 99%

Analysis of the Impact of Solvency Capital on Efficiency: Evidence from Takaful Firms in GCC Region

Asafa¹,

Hamid²

2016

HSS

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“…It is a mechanism of distributing the risk from one shoulder to many. It is a contract whereby the insurer agrees to indemnify the insured against losses arising out of certain specified unforeseen contingencies or perils on receipt of a consideration known as the premium (Das, Davies, & Podpiera, 2003). The net premiums are the portion of the gross premiums required to provide for all benefits and expenses, excluding acquisition costs or coasts that are required to be charged to expense as incurred.…”

Section: Insurance Industrymentioning

confidence: 99%

Portfolio Allocation and Financial Performance of Insurance Industry in Nigeria

Olusegun¹,

Omotayo²

2022

IJEFM

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This paper investigated the connection between portfolio allocation and financial performance of insurance industry in Nigeria. The data was obtained from secondary sources and estimated with autoregressive distributed lag (ARDL). The study discovered a long-run relationship between portfolio allocation to cash and equivalents, financial assets, reinsurance assets, investment properties, other receivables and prepayments, property and equipment and financial performance proxied by growth in gross premium income (GPI). Further research reveals that allocation to in cash and equivalents, other receivables and prepayments and properties and equipment had an insignificant negative effect on GPI. Furthermore, the study discovered that investment in financial assets, reinsurance assets and investment properties had positive statistically significant relationship with GPI. This result implies that insurance companies’ investment in financial assets, reinsurance assets, investment properties is relativ ely high and do have strong correlation with financial performance. Hence, portfolio management in insurance industry plays a crucial role in finance. Policy should be geared towards purchase of valueadding property and equipment, purchase of intangibles, efficient utilization of proceeds from sale of property and equipment and retention of cash and cash equivalents for prompt payment of claims.

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“…To that end, losses more than capital will likely represent only a small fraction of GDP and may as well have limited macroeconomic effects. Das, Nigel and Richard (2003) explored the impact of regulatory governance on financial system stability; they used multi-cross-sectional data of developing and developed countries and applied Weighted Least-square Regression, found a significance influence of regulatory governance on financial system soundness. Using variables reflecting macroeconomic conditions, structure of the banking system and the quality of political institutions and public sector governance.…”

Section: Empirical Reviewmentioning

confidence: 99%

Deposit insurance and credit risk of Nigeria banking system: a time series analysis

Igwe

Toby

2022

JGEB

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This study examined the relationship between deposit insurance and nonperforming loans ratio of Nigeria banking system. Time series data were sourced from the publications of Nigeria deposit Insurance Corporation, Central Bank of Nigeria, and Stock Exchange Factsheet. Nonperforming loan ratio was measure for dependent variable while deposit in insurance was proxied by insured deposits and risk based premium. Ordinary Least Square (OLS), Augmented Dickey Fuller Test, Johansen Co-integration test, normalized Co-integrating equations, parsimonious vector error correction model and pair-wise causality tests were used to conduct the investigations and analysis. The study found that 63.5 percent of variation in the level of nonperforming loan ratio is explained by variations in insured deposits and risk-based premium. Insured deposits and risk-based premium have a negative relationship with the level of bank distress. From the findings, we conclude that Nigeria deposit insurance has a moderate relationship with commercial banks stability. From the findings, we recommend that role of deposit insurance in eliminating costly bank runs should be is widely recognized. Nigeria Deposit Insurance Corporation should adopt the more sophisticated differential premium assessment system (DPAS) where risk is explicitly considered in assessing premium payable by insured institutions, and Nigeria Deposit Insurance Corporation should protect bank deposits in Nigeria and improve to a large extent insured deposit of the deposit money banks deposit in the short run and long run to avert the cases of bank failure.

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Insurance and Issues in Financial Soundness

Cited by 8 publications

References 0 publications

Analysis of the Impact of Solvency Capital on Efficiency: Evidence from Takaful Firms in GCC Region

Analysis of the Impact of Solvency Capital on Efficiency: Evidence from Takaful Firms in GCC Region

Portfolio Allocation and Financial Performance of Insurance Industry in Nigeria

Deposit insurance and credit risk of Nigeria banking system: a time series analysis

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