Financial Health of a Commercial Insurance Company and its Coherences
Keywords:insurance industry, commercial insurance company, solvency, financial stability, financial health of a commercial insurance company
AbstractPurpose of the article: The main purpose of the article is to define the term “financial health of a commercial insurance company” and identify the factors that influence management and its economic results of a commercial insurance company. The above mentioned term will be faced with other similar terms such as financial stability, financial strength, solvency, liquidity or profitability (always with emphasis on the insurance sector). Related to this purpose, this hypothesis is formulated: “Financial health of a commercial insurance company can be identified in the long perspective with the term financial stability and as its synonym the concept of solvency can be stated.” Methodology/methods: The methods of description, analysis, deduction and induction will be used in the article. The research part is based on a qualitative basis. It combines three methods of qualitative research: interviews with experts, a structured interview with open questions, a questionnaire with open questions. Its subject is a managed conversation with leading experts in the field of insurance and related branches, who answered questions related to the topic. Evaluation of interviews was done by method of interview analysis, respectively thematic analysis and subsequent synthesis based on respondents’ answers. The synthesis is used as a method to gain new knowledge. The conclusions are the basis for discussion for the theory completion in the case of the term mentioned above and for statements to other contexts that are defined in the objectives of the article. Synthetic approach is applied in the formulation of conclusions of the research. Significant findings for the theory are obtained by abstraction, as derived from observations of the issues, i.e. financial health of a commercial insurance company. The evaluation also includes a summary of significant matters and it reflects the opinion of the author devised throughout literature and based on interviews. Scientific aim: Article aims to define on the theoretical level the term financial health of a commercial insurance company and identify the factors that influence management and its economic results of a commercial insurance company. Definition of „financial health of a commercial insurance company“ is the main research aim of the article. Findings: Among the findings the formulation of the term of financial health of a commercial insurance company can be included, as specified in the article text. In terms of factors influencing the management of commercial insurance these ones can be stated: (a) good governance realized by a competent management and optimal internal settings of an insurance company, (b) capital strength, (c) the ability to identify and evaluate risk in accordance with a healthy competitive environment, (d) underwriting of risks, (e) an application of a correct trade policy, (f) correct determination of technical provisions, (g) adequate reinsurance program and the selection of a stable and (financial) healthy reinsurers, (h) the ability to properly manage the entrusted money and assess developments in the financial markets. Conclusions: This article aimed to clear a terminological ambiguity in a sphere of financial health of a commercial insurance company and similar terms such as financial stability, financial strength, solvency, liquidity or profitability. The above formulated hypothesis had a negative result, which supports the argument that the term financial health of a commercial insurance company can be defined as a completely autonomous term with its pragmatic object matter.
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