Modeling Solvency of insurance companies over time
Subject Areas : Financial Econometrics and Quantitative Methods
Danial Poshtdar
1
,
Fatemeh Saraf
2
,
Ghodratollah Emamverdi
3
,
Norouz Noorolahzadeh
4
1 - PhD student in finance, South Tehran Branch, Islamic Azad University, Tehran ,Iran.
2 - Department of Accounting, South Tehran Branch, Islamic Azad University, Tehran, Iran.
3 - Department of economy, central Tehran Branch, Islamic Azad University, Tehran ,Iran
4 - Department of accounting, South Tehran Branch, Islamic Azad University, Tehran ,Iran
Keywords: Systematic Risks, Unsystematic Risks, Solvency, Bayesian Models Averaging, Time-Varying Parameter.,
Abstract :
Introduction Based on Wilson's model, the present research has attempted to model Solvency in insurance companies using the Bayesian averaging model. Research Methodology This research is practical in terms of purpose and correlational in terms of nature. In order to achieve the goal of the research, the number of 27 insurance companies admitted to the Tehran Stock Exchange during the years 2005-1 to 2020-4, their selection and information was used in the estimation of the model Results Based on the results, among the BMA, TVP-DMA, TVP-DMS models, the BMA model has been evaluated as the most efficient to identify the most important variables affecting the level of Solvency. Based on this, 40 variables (in 2 categories of pre-warning indicators and monitoring indicators) affecting Solvency were included in the Bayesian averaging model, and based on the previous probabilities, 13 variables were identified as non-fragile variables. Discussion and Conclusion Based on the general results, the long-term elasticity between Solvency and research variables is higher than the short-term elasticity, which indicates the more severe impact of these risks on the stability of insurance companies. The continuation of this intensity of these risks can cause the bankruptcy of the insurance industry.