Analysis of Financial Stability of Indian Non Life Insurance Companies

Abstract

World over after liberalization insurance sector has undergone significant transformation. This is also true with Indian insurance market, where insurance penetration and density is very low compared to other countries. Therefore, many foreign insurance companies were lured to make entry in Indian insurance in order to insulate positive spread from large untapped insurance market, mainly by entering into joint venture with local partners. Thus Indian insurance market after liberalization was assaulted by the pressure of globalization, competition from multinational insurance companies and lavish underwriting chase which are seen as threats as well as opportunities for insurance companies. However, entry of new players has resulted into heavy underwriting losses for Indian public and private insurers. But heavy underwriting losses had reverse impact on their solvency margins. In present paper, the Insurance Solvency International Ltd. (ISI) predictors have been employed in this paper to study the solvency position of Indian non life insurers. Further, study highlights the extent of relationship between various factors and solvency of non life insurers in India by using multiple regression analysis. The result of the study has shown that claim ratio and firm size have greater impact on solvency position of insurance companies.