One of the most significant requirements for the presence of the regulator in the insurance industry, is the collection and analysis of the data and calculation of the efficient indices of the insurance companies and the reaction of such indices to the shocks received by the industry and the other macroeconomic variables. In view of this, the regulatory body requires indices for the measurement and analysis of the financial health of the insurance industry.
Given the legal obligations and the bylaws pertaining to the financial supervision (instead of tariff-based monitoring) in Iran’s insurance industry and considering the intangible nature of the insurance operations and the relevant complexities and the intertwined concepts such as financial power, solvency, stability, and performance of the insurance companies, the application of the advanced and enhanced supervisory methods are inevitable. In view of this, IRC has recently conducted and released a research project entitled “Formulation and Measurement of Insurers’ Financial Stability Indices in Iran”. Incorporating an applied approach, the research is aimed at elucidating the financial stability in the active insurance companies in Iran and offering an enhanced monitoring index in order to lead the insurance companies.
In the present study, the subindices of the financial stability index have been extracted and in order to localize them, the Delphi method has been used for collecting the views of the industry experts. Among the extracted subindices and based on the experts’ views, 27 subindices are taken for the calculation of the combined financial stability index. Finally, using principal component analysis, the insurance industry financial stability is calculated based on the set of financial stability indices of insurers during 2006-2017.
According to the research findings, during 2011-2013, the combined financial stability index of the insurance industry indicated an increasing growth. However, during the same period, this trend was downward for some insurance companies. Since the beginning of 2011, the index has shown a decline. The most significant reasons for such were the intensity of the sanctions posed on the insurance industry banning any foreign reinsurance activity and the insurance policies related to the international transportation including cargo insurance.
Based on IRC’s Public Relations report, one of the benefits of the calculated financial stability index is its predictable capacity and its alarming function.
If interested to download and read the Persian full text of the aforementioned research report, click on the following link: https://www.irc.ac.ir/fa-IR/Irc/4944/Articles/view/16040/1487.