An analysis of insurance companies financial stability and its measurement

Abstract

This study presents theoretical and practical aspects of insurance company’s financial stability and its measurement. As this financial stability conception is prone to changes due to forthcoming Solvency II and IFRS 4 “Insurance contracts” phase II requirements, the author employs deductive and inductive methods to evaluate how these changes could influence insurance market situation and what challenges should be overcome to get the clear picture of insurance companies financial position. Presenting the main practices applied today for measuring solvency capital in insurance market, the study also highlights the interconnectivity between solvency capital and sufficient insurance liabilities to guaranty sound financial stability measurement practice. The study also analyses practice of solvency capital and technical provisions measurement in Lithuania insurance market and presents how much it will be influenced by foreseen changes.