Browsing by Author "Samadhith, G. A. P."

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    Significance of Company-Specific & Macroeconomic Determinants on the Solvency of Sri Lankan Insurance Companies
    (Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka., 2025) Samadhith, G. A. P.; Liyanage, M. L. D. C. J.
    Introduction: This study investigates how company-specific variables including return on assets, leverage, investment yield, claims ratio, and retention ratio, as well as macroeconomic variables including GDP growth rate, inflation rate, and interest rate, affect the solvency of insurance companies. The study fills the empirical gap in Sri Lanka’s insurance industry by analyzing key determinants of life and general insurance companies’ solvency after introducing the Risk-Based Capital requirement in 2016. Methodology: The quantitative research methodology was used to analyze the key determinants of solvency by taking 12 life insurance and 10 general insurance companies operating from 2016 to 2023. Statistical methods including descriptive analysis, correlation analysis, and panel data regression analysis were used to assess the impact of selected independent variables on the solvency of insurance companies. Findings: The findings revealed that the return on assets, investment yield, and retention ratio have a significant positive influence on solvency, and the claims ratio has a significant negative influence on the solvency of both sectors, indicating the importance of operational efficiencies for greater financial stability. The GDP growth rate and the interest rate had a statistically insignificant impact on the solvency of both sectors, and the inflation rate was significant with a negative impact only on general insurance, which could be attributed to the economic volatility during the sample period analyzed. Conclusion: In conclusion, the study highlights the critical role of insurance companies’ operational efficiency and continuous monitoring of macroeconomic variables to sustain in the industry, with actionable recommendations to the regulators and insurers to maintain adequate solvency within the industry while protecting policyholders’ interests.