Factors Affecting the Solvency of Palestinian Insurance Companies Listed at Palestine Exchange: A Comparative Study Before and After the Implementation of New Solvency Regulations رسالة ماجستير

Abstract

This critical era of globalization considers the insurance services sector as a basic constituent of both economic and societal altercation. There is no doubt that the insurance sector provides the required security against hazards that threat the growth of economy. Thus, this thesis comes to put under scrutiny the issue of financial solvency of the listed insurance companies on Palestine exchange. It then identifies the effects of profitability, liquidity, leverage, premium growth, company size and claims ratio on the insurance firms. Furthermore, it also analyzes the impact of fairness, standard of market conduct and premium growth on the recent legal changes applied by the Palestinian Capital Market Authority on solvency margin ratio. This process includes regulations on the qualifications of the minimum solvency margin, grading systems, and supervisory control based on risk assessment. Hence, the thesis relies on secondary data drawn from eight Palestinian Ics listed on Pex during the period from Q3/2020 to Q4/2022. It aims at examining the relationship between the independent variables and solvency before and following the implementation of the new regulations. The findings showed a significant changes in the determinants of solvency during two different periods. The findings also illustrate that regulatory changes, profitability and liquidity have moderate impacts on solvency. It then showed a negative impact of the high leverage and claims ratio. Premium growth and company size had conflicting effects. The updated solvency margin requirements also provide premium, profitability, liquidity and more pronounced positive influence, in addition to improve the financial management. The regulatory compliance lowered the negative effects of these metrics which indicates that leverage and claims ratios are more strictly managed. Furthermore, the study emphasizes on the fact that risks must be monitored and controlled in order to achieve the desired development and sustainability in the insurance sector. It emphasizes on supporting the domestic policy formulation of the VI insurance sector in Palestine to make it possible to achieve proper balance between financial, economic, market stability on one side and the security, protection, and confidence of the investors on the other. Thus, the study findings suggest that ICs focus on maximizing profits by managing liquidity more effectively, supervising financial leverage, and practicing risk based underwriting to remain solvent. The findings also showed that the companies may consider mergers and growth in new markets even as controlling claims ratio. The future studies will also consider the international market differentiation and other economic factors that support the financial stability