Economic and Market Factors of Solvency in Indian Life Insurance Companies

Insurer's solvency adversely influences various stakeholders. Policyholders pay premium long before receiving any possible claim payments. Risk protection for policyholders relies on insurer's financial ability to indemnify the covered loss. Both exogenous and endogenous factors play a significant role in solvency surveillance of insurance companies. This paper examines the relationship between solvency and the impact of economic and market factors on solvency of life insurers in India for a period of ten years, i e 2005 through 2014 using multiple regression model. The results indicate that number of life insurers and inflation rates are statistically, significantly related to solvency of life insurers implying that they are important contributors in solvency of life insurance firms. Overall insurance market and economic variables are key factors in financial stability of firms and contributes to stakeholders in insurance industry and also adds to policy discussion.