Expansion and threat of insolvency: Analysis of the Indian Insurance Industry

This paper identifies the role of business specific exogenous and endogenous variables explaining solvency of insurers in an expanding market in India. Using the results, we predict whether or not the existing public insurers along with their private competitors will be carrying on a inancially viable business. A method to estimate solvency using the regulatory guidelines is presented. For insurers, returns received from total investible funds, real interest rate, size, and number of insurers determine solvency. Combined ratio and underwriting ratios also statistically show a linkage with solvency. Few measures so as to strengthen the insurers against problems related to insolvency are discussed in the light of the empirical results