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Impacts of Insurers’ Financial Insolvency on Non-Life Insurance Companies’ Profitability: Evidence from Bangladesh

Author

Listed:
  • Md. Nur Alam Siddik

    (Department of Finance and Banking, Begum Rokeya University, Rangpur 5404, Bangladesh)

  • Md. Emran Hosen

    (Department of Finance and Banking, Begum Rokeya University, Rangpur 5404, Bangladesh)

  • Md. Firoze Miah

    (Department of Finance and Banking, Begum Rokeya University, Rangpur 5404, Bangladesh)

  • Sajal Kabiraj

    (School of Entrepreneurship and Business, Häme University of Applied Sciences Ltd. (HAMK), 37630 Valkeakosk, Finland)

  • Shanmugan Joghee

    (School of Business, Skyline University College, University City of Sharjah, Sharjah 1797, United Arab Emirates)

  • Swamynathan Ramakrishnan

    (Amity Business School, Amity University, Dubai 345019, United Arab Emirates)

Abstract

A stable and healthy insurance industry plays a vital role in sustaining an economy resistant to economic shocks by providing an efficient risk-transition mechanism. There is a relative scarcity of research inspecting the impact of insurers’ financial insolvency on the profitability of insurance firms. Employing 2011–2019 panel data of 16 non-life insurance companies operating in Bangladesh, this research endeavors to examine the impacts of insurers’ financial insolvency on the profitability of insurance companies measured by return ratios, return on assets (ROA), and return on equity (ROE). Fixed-effect regression outcome implies that insurers’ financial insolvency has a significant adverse influence on non-life insurance companies’ profitability. Further findings indicate that financial leverage, technical provision, age, and inflation have a noteworthy adverse influence on profitability. The outcomes of this research are of greater significance for policymakers in tackling insolvency and formulating policies to boost the growth of insurance profitability. In addition, this study aims to serve as a benchmark for other countries’ insurance industries to emulate recovery strategies from financial insolvency.

Suggested Citation

  • Md. Nur Alam Siddik & Md. Emran Hosen & Md. Firoze Miah & Sajal Kabiraj & Shanmugan Joghee & Swamynathan Ramakrishnan, 2022. "Impacts of Insurers’ Financial Insolvency on Non-Life Insurance Companies’ Profitability: Evidence from Bangladesh," IJFS, MDPI, vol. 10(3), pages 1-15, September.
    • Handle: RePEc:gam:jijfss:v:10:y:2022:i:3:p:80-:d:915801
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    References listed on IDEAS

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    1. Caporale, Guglielmo Maria & Cerrato, Mario & Zhang, Xuan, 2017. "Analysing the determinants of insolvency risk for general insurance firms in the UK," Journal of Banking & Finance, Elsevier, vol. 84(C), pages 107-122.
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    5. Denny Maulana & Bambang Mulyana, 2020. "Factors Affecting Profitability of General Insurance Companies in Indonesia," The Economics and Finance Letters, Conscientia Beam, vol. 7(2), pages 236-246.
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