Economic crisis and determinants of solvency in the insurance sector: new evidence from Spain

Ignacio Moreno, Purificación Parrado‐Martínez and Antonio Trujillo‐Ponce

Accounting and Finance, 2020, vol. 60, issue 3, 2965-2994

Abstract: This paper analyses the factors that determine the solvency of insurance companies operating in Spain. The selected time span, from 2008 to 2015, encompasses a period of economic instability characterised 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 organisation but inversely related to size, reinsurance use, longer‐tailed business and life insurance specialisation. We also find that less concentrated markets and the context of an economic crisis decrease solvency margins.

Date: 2020
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