Quantifying insurance risks: Monte Carlo simulations and capital requirements

Financial performance is the fundamental aspect to test the performance of the companies. The performance of insurance sector, like any other service industry, is supposed to depend significantly on customers. When it comes to customers, it is an established fact that customer satisfaction would be an important element. Customer satisfaction primarily depends on the quality of service it gets. It can be safely hypothesized that better service quality would lead to higher satisfaction, which would ultimately lead to higher profits for the company. Studies on this relationship in the insurance sector for Saudi Arabia are missing. Hence, this study aims at studying both the profitability of companies and quality of service and tries to relate it to customer satisfaction. The results are quite surprising, as the study establishes that although the qualities of services are found wanting in many areas, companies are earning good profits. A probable reason could be the statutory nature of the services. Nevertheless, this study recommends improving the quality of services and differentiating services between age groups for further improvement.

In the current conditions of the Ukrainian economy, which is characterized by crisis phenomena and frequent changes in legislation, the insurance organizations are facing a number of difficulties in maintaining their financial sustainability. Moreover, these processes take place under the increased requirements for solvency of insurers. However, a significant part of domestic insurance companies is financially unstable, which is conditioned not only by the lack of funds, but also by the low level of management. This situation hinders the further development of the insurance market in Ukraine and has a negative impact on all areas of the domestic financial system and prevents it from successful integration into the European financial field. In order to address this problem, it is necessary to distinguish the key groups of risks that affect the financial sustainability of insurance organizations, among which there are the following: insurance, strategic, market risk, risk of inefficient capital structure, risk of limiting the insurance company’s liquidity, tax risk, investment risk, operational risk, the risk of ineffective organizational structure of the enterprise, and information risk. It should be noted that under conditions of changing environment, the impact of these risks only increases, and therefore the task of minimizing the impact of these risks on the activities of insurance companies is highly important. Accordingly, the authors of the article proposed a four-stage strategy to manage the financial sustainability of the insurance company, the purpose of which is to identify the risks of limiting the insurer’s financial sustainability, their qualitative and quantitative assessment, as well as the development and implementation of appropriate measures to minimize and eliminate unacceptable consequences.

This study aims to investigate the effect that firm-specific factors have on the financial performance of South African insurance companies. This paper looked at the performance of 36 insurers that are publicly traded and have quantifiable markets from 2008 to 2019. The return on assets (ROA) was calculated as a function of the financial performance in this study. While the firm size, leverage ratio, premium growth rate, liquidity ratio, and tangibility of assets were examined as dependent factors using the panel data regression technique, the premium growth rate, liquidity ratio, and tangibility of assets were explored as independent variables. According to the findings of the regression analysis, other firm-specific factors, with the exception of leverage and liquidity ratios, do not have a statistically significant influence on the financial performance of South African insurance companies. A negative and insignificant association was discovered between premium growth rate and ROA at –0.0023 and tangibility of assets and ROA at –0.0113. There was a strong positive and significant relationship between liquidity ratio and ROA at 0.0927, while the size had a positive but insignificant relationship with ROA at 0.0039. Leverage ratio and ROA had a negative but significant relationship at –0.1512. This study suggests that the use of automated systems and insured techs will be advantageous in cutting costs associated with policyholder enrollment, claims agreement, and even easily achieved tailor-made policy initiatives.