Income tax on state and municipal securities. Modern problems of science and education Analysis of the solvency and financial stability of an insurance company
4.4. Ensuring the solvency and financial stability of oats
Financial stability of an insurance organization – the ability to fulfill the assumed insurance obligations under the influence of unfavorable factors on its activity and changes in the economic situation.
Guarantees to ensure the financial stability of the insurer in accordance with Art. 25 of the Law "On the organization of insurance business in the Russian Federation" are:
- economically justified insurance rates;
- insurance reserves sufficient to fulfill obligations for insurance, coinsurance, reinsurance, mutual insurance;
- own funds;
- reinsurance.
Comments: Legislative acts regulating the procedure for the entry of OVS into the market and their subsequent activities do not determine the solvency and financial stability of companies. At the same time, the legislator does not establish any restrictions on guarantees of ensuring financial stability for an insurer carrying out mutual insurance.
There are no provisions in the law designed to ensure the financial sustainability of the OVS, namely:
requirements regarding the procedure for the formation of financial resources of a mutual insurance company at the initial stage of its creation;
requirements for the organization of reinsurance.
The combination of these requirements, together with the placement of insurance reserves, is the foundation without which a mutual insurance society cannot exist normally.
The criterion for the financial stability of the insurer is usually considered to be the sufficiency of insurance reserves and own funds to fulfill the obligations of the insurer. The financial stability of the insurer, its ability to pay, and the ability to fulfill its obligations on insurance payments depends on how correctly insurance reserves are calculated, how they take into account unfulfilled or incompletely fulfilled obligations. Reserves represent a kind of financial picture of the insurer's provision of the obligations assumed. Mutual insurance companies calculate insurance reserves starting from the moment of obtaining a license to carry out mutual insurance.
In clause 2. Art. 25 "Conditions for ensuring the financial stability of insurers" of Law No. 4015-1 states that "the own funds of insurers (with the exception of mutual insurance companies that insure exclusively their members) include authorized capital, reserve capital, additional capital, retained earnings" ... Thus, the fundamental difference between the OVS insurance fund and the fund of a commercial insurer is declared.
It should be noted that the special Law governing mutual insurance does not provide for the formation of own funds for OVS. Therefore, it is possible to hypothetically establish their presence, including the authorized capital (authorized capital) and reserve capital (guarantee reserve).
reference Information : Clause 3 of Article 25 of Law No. 4015-1 "Insurers (excluding mutual insurance companies) must have a fully paid authorized capital, the amount of which must not be lower than the minimum amount of the authorized capital established by this Law. "
In the regulatory documents there is no special concept denoting the initial funds of the mutual insurance society, formed at the stage of the organization's creation. At the same time, mutual insurance companies should form a fund, which by its purpose, conditions of formation and spending is similar to the authorized capital of joint-stock insurance companies - the "start-up" capital that provides insurance guarantees in the first years of the insurer's activity. Based on the purpose of their use, the most acceptable designations for this concept can be used such as, constituent fund, initial fund, guarantee fund.
It seems that the formation of the initial fund of the society is its main financial problem. The projected difficulties in the activities of the OVS may be associated precisely with the search for sources for the formation of the initial insurance reserve fund at the time of the beginning of their activities. In order for the OVS to start insurance activities, it must have at its disposal sufficient funds to make insurance payments even before the accumulation of the necessary funds from the contributions of its members. It should be taken into account that the minimum number of participants (according to the Law) - individuals - may be 5 people.
Thus, the stability of the activities of non-profit societies, which is OVS, should be ensured the original mutual fund, the minimum size of which must be determined by law, as well as the conditions for its formation, the lower and upper boundaries, differences in the procedure for its formation by legal entities and individuals. When choosing the optimal method for forming the initial fund, the number of contracts (members) of the OBC will be of significant importance, since with a small number of them, difficulties may arise in forming a sufficient insurance population to cover losses, as well as an increase in the number of members can lead to complications in the management of society. Therefore, it is advisable to establish by law the minimum and maximum norms for the number of participants in a society, taking into account the historical domestic experience and the centuries-old foreign practice of mutual insurance.
As a source of formation of the initial fund, one could consider the entrance fees of members of the society and borrowed funds. This requires an amendment to the Law in terms of determining the direction of use of these funds, not to cover the costs associated with the statutory activities of the company, but for the purpose of forming a "start-up" insurance fund (initial mutual fund) to ensure the fulfillment of insurance obligations in the first years of activity society. Moreover, for the purpose of covering the costs associated with the company's statutory activities, a special source is provided.
Economic logic and historical practice also indicate the need to correlate the amount of financial participation of an individual member of the company in the formation of the initial fund, as well as the amount of risks that he insured in the company, with the scope of powers of this member - participant of the general meeting when making decisions that affect the economic results of activities companies: approval of the insurance conditions, the procedure for the formation of reserves, the source of coverage for the resulting loss based on the results of mutual insurance for the reporting year, the decision to make an additional contribution by the members of the company and the determination of its size, approval of the insurance rate, as well as the structure of the tariff rate, etc.
The presence of an initial fund, regulated by a special law on mutual insurance, as a prerequisite for obtaining an OBC license and guaranteeing that the company fulfills its insurance obligations at the time of its creation, would largely neutralize the distrust of enterprises and the population in mutual companies and strengthen its position in the insurance market.
At the same time, in order to ensure solvency and strengthen the financial condition, the mutual society must (can) form and guarantee reserve, the sources of the formation of which are income from insurance and investment activities.
The amount of the reserve should be determined by the statutory acts on insurance and the OVS Charter. In the first years of activity, it can be formed using borrowed funds. Subsequently, the guarantee reserve can be replenished from investment income or income received as a result of a significant excess of incoming contributions over payments based on the results of the reporting period.
As a possible option for determining the size of the guarantee fund, one can use the experience of the mutual insurance societies of the member states of the European Union. The European Union Directive (dated July 24, 1973) defined the concept of solvency of the OBC, which "... must have technical reserves corresponding to the assumed obligations, and a solvency reserve free from any obligations ...". At the same time, the guarantee reserve consisting of property free from obligations in the amount of up to 2/3 of the solvency reserve of the mutual company should not fall below the threshold beyond which there is a danger to financial stability. The solvency of the mutual company is ensured in the first years of its activity by a minimum initial fund - in the amount of 1/3 of the solvency reserve, and by a fund for organizational expenses.
Thus, in the process of activity, the solvency of the OBC can be provided by insurance reserves and a solvency reserve. The amount of sufficient solvency reserve is determined by the volume of the insurer's operations. According to the procedure adopted in the EU countries, the solvency of the OBC is assessed by comparing the actual reserve of solvency with the calculated value - the solvency limit. The size of the solvency reserve also depends on the classification of risks taken by the OBC, and on the nature of the company's activities (life and health insurance or insurance other than life insurance).
So, in the countries of the European Union, the size of the guarantee fund required to ensure solvency ranges from 200 thousand to 400 thousand euros. If the volume of transactions on mutual insurance exceeds the established limit of the collected premium (in general, 1,000 thousand euros), the guarantee fund must be increased several times.
Bringing in this way the norms of the domestic legislation of the Russian Federation in accordance with international legal norms (in particular, those regulating the activities of mutual insurance societies within the framework of the EU Directives) is relevant in connection with Russia's accession to the World Trade Organization. It is also necessary to take into account that with the liberalization of the Russian insurance market, it is possible that representative offices or subsidiaries of foreign mutual insurance companies may appear in Russia, which in this case will be able to act in accordance with the requirements of the Law "On Mutual Insurance".
Thus, a possible discrepancy between expected and actual insurance benefits can be resolved with funds from the guarantee reserve and the initial mutual fund.
In addition to the specified features of the formation of insurance resources of a mutual insurance company, special attention should be paid to the intangible (potential) resources of the company, provided by the joint and several subsidiary liability of the members of the company for insurance obligations (clause 3, article 7). For members leaving the company, subsidiary liability remains in relation to the obligations of the company that arose before the day they left the company for another 2 years (clause 8, article 8).
reference Information : Clause 3 of Article 7 of Law No. 286 - FZ: The members of the company jointly bear subsidiary liability for the insurance obligations of the company within the unpaid part of the additional contribution of each of the members of the company. The said subsidiary liability means that in the event that a member of the company does not make an additional contribution, each other member of the company is obliged to make a part of this additional contribution in proportion to the insurance premium due from the member of the company.
clause 8, Article 8. A member of the society, within two years from the date of termination of membership in the society, equally with all members of the society, bears subsidiary responsibility for the insurance obligations of the society that arose before the date of termination of membership in the society.
The problem of solvency for an insurance organization, that is, guarantees to fulfill all its obligations on insurance payments at the expense of insurance reserves and its own funds, is one of the most important in the conditions of the formation of the insurance market.
Solvency is the basis of the financial stability of the insurance organization and, therefore, the most important indicator of the attractiveness of the insurer for potential customers. When compiling a rating of insurance organizations, solvency is usually put in first place among other reliability criteria.
Ensuring the financial stability and solvency of an insurance organization in the course of its activities is one of the most important and difficult tasks solved in the process of managing insurance capital.
It should be borne in mind that the concepts of "financial stability" and "solvency" are different.
Financial stability is the ability of an insurance organization to fulfill its obligations under insurance contracts under the influence of unfavorable factors of changes in the economic environment.
Solvency is a particular manifestation of the financial stability of the insurer, and reflects its ability to pay for obligations not in extreme, but in normal conditions. During the formation of the domestic insurance market, most insurance organizations are faced with the problem of a deterioration in their financial condition. This is due to a number of reasons: insufficient equity capital, low business activity of insurers, shortcomings in the current legislation, risky investment policy. As a result - uncovered losses of previous years, almost no equity capital and failure of insurers to fulfill their obligations. All of this can lead to adverse economic and social consequences for the entire society. Therefore, the law defines the conditions that ensure the financial stability of insurers: the presence of paid authorized funds, insurance reserves, as well as a reinsurance system.
Insurer, who has assumed obligations in an amount exceeding the possibility of their fulfillment at the expense of his own funds, in accordance with the legislation, to transfer to the reinsurer part of the fulfillment of these obligations. It is generally accepted that the ratio of payments for risks transferred to reinsurance to the total amount of net premium (retention rate) should not exceed 50%. This is explained by the fact that with too large a share of the risk given to reinsurance, an insurance organization may become dependent on the reinsurer's performance of its obligations.
However, other factors also affect the financial stability of the insurance organization and, accordingly, the solvency (some of them are discussed above). The financial stability of the insurer is achieved:
- · Increase in the volume of received insurance premiums and optimization of insurance payments by type of insurance;
- · Decrease in accounts receivable and payable;
- · The presence of sufficient equity capital (free from any obligations of the insurer's own funds);
- · Conducting an optimal tariff policy;
- · Compliance with the standard size of the ratio between the assets and liabilities of the insurer;
- · Ensuring the profitable activities of the insurance organization;
- · An effective process of insurance risk management;
- · Rationalizing the structure and increasing the efficiency of investment of insurance reserves and the insurer's own funds, etc.
Thus, the concept of "financial stability" includes an assessment of various aspects of the insurer's activities and gives an idea of \u200b\u200bthe financial well-being of the insurance organization in the long term.
There are a number of indicators for assessing the financial position of an insurance organization. However, in the Republic of Belarus the system of indicators of financial condition is in the stage of formation.
The assessment of the financial condition and its changes for the reporting period of a particular insurance organization is carried out according to the balance sheet. In the balance sheet of an insurance organization, there are three components that have a decisive impact on financial stability: assets, equity and liabilities. They largely determine the solvency of the insurer.
The world insurance experience has developed a method for assessing solvency through calculating the ratio of free assets and liabilities under existing insurance contracts. The amount of free assets must be greater than or equal to the assumed insurance obligations of the insurer:
where A is the insurer's assets,
О - the volume of the insurer's obligations.
At the same time, the assets of the insurer are understood as the totality of funds and investments taken to ensure insurance reserves and the solvency reserve, secured by equity and investments in the form of the insurer's property (fixed assets, material values, funds, financial investments, etc.)
The amount of assumed insurance liabilities is determined by the amount of formed insurance reserves.
According to the requirements of Article 16 of the First Directive of the Council of the European Communities of July 24, 1973 "each member state obliges any enterprise registered on its territory to form a solvency reserve in the amount corresponding to the scope of the enterprise's activity." In this directive, the solvency reserve is defined as the assets of the enterprise, free from any future liabilities, minus claims, i.e. in the amount of equity capital.
Equity capital of insurance organizations, as already noted, includes the amount of paid-in authorized capital, additional capital, reserve fund, retained earnings of previous years and the reporting year, accumulation and consumption funds minus intangible assets, uncovered losses.
It should be noted that the equity capital of the insurer for its intended purpose is more important than the capital of industrial enterprises, because the capital of insurance organizations guarantees not only today's coverage of risks, but also provides future coverage. Equity capital is an additional guarantee to insurance reserves to cover the liabilities of the insurer and presupposes that the insurer pursues a reliable investment policy and an effective reinsurance system.
The amount of the insurer's obligations under concluded insurance contracts, but not fulfilled at a given time, is reflected by insurance reserves. The correspondence of the size of equity capital to the volume of obligations assumed is one of the most important criteria for assessing the solvency of an insurance organization.
Since the size of insurance reserves is calculated according to special methods and is determined quite accurately, the problem of assessing the solvency of an insurance organization is reduced to assessing equity capital to cover the solvency reserve.
Equity capital adequacy is assessed by comparing its size with two values \u200b\u200b- with the solvency reserve and with the guarantee fund.
According to the current insurance legislation, the solvency reserve for life insurance operations is set at 4% of the amount of the reserve for life insurance.
The standard size of the solvency reserve (for all types of insurance, except life insurance) is calculated in accordance with Articles 1-4 of EU Directive 87/343 of 06/22/1987. using two indicators, depending on:
- 1.from the amounts of insurance premiums received in the last year (P1);
- 2. of the average amount of insurance payments for the last three calendar years (P2).
The highest result is taken as the standard.
The first indicator is calculated as follows:
П1 \u003d х k х kn, (4)
where Svz is the amount of insurance premiums for the reporting year, taking into account contributions for direct insurance and coinsurance (minus contributions returned under terminated contracts) and the amount of insurance premiums accepted for reinsurance or retrocession for types of insurance other than life insurance for the analyzed period;
F - the amount allocated to the fund (reserve) of preventive measures and guarantee funds in accordance with the current legislation during the same period;
k is the adjustment coefficient established for insurers by the First Directive of the Council of the European Communities (equal to 0.18);
kn is the correction factor, which is the largest value of two values: 0.5 and the share of the direct insurer in insurance payments, calculated as the ratio between the amount of actually paid insurance payments minus the amount of compensation for the share of losses on risks transferred to reinsurance and the total amount actually made insurance payments under insurance contracts other than life insurance for the analyzed period (equal to 12 months). If these payments for the analyzed period were not made, the correction factor is not used in the calculation.
This formula shows that the solvency ratio, equal to the first result, is determined by the amount of premiums (the obligations assumed are estimated through premiums).
The second indicator is calculated using the following formula:
P2 \u003d t x k x kn, (5)
where m is the average annual amount of insurance payments (for 3 calendar years preceding the reporting date preceding the reporting date) made under direct insurance and coinsurance operations and under contracts accepted for reinsurance or retrocession;
k is the adjustment coefficient established for insurers by the First Directive of the Council of the European Communities (equal to 0.26);
kn - correction factor, calculated similarly to the first indicator. The analyzed period when calculating the correction factor for the second indicator is set equal to 12 months preceding the reporting date.
This formula shows that the solvency ratio equal to the second result is determined by the amount of payments that characterize the obligations being fulfilled.
The guarantee fund is determined at 1/3 of the solvency reserve.
An insurance organization is solvent if equity capital is not lower than the solvency reserve. However, if this requirement is not met, then the condition is checked that the actual solvency is at least higher than the guarantee fund, equal to 1/3 of the standard. An insurance organization is partially solvent if the equity capital is not lower than the guarantee fund. If this ratio is not met (equity capital is lower than the guarantee fund), then the insurance company is insolvent.
To calculate equity capital, solvency reserve and guarantee fund, the data of the accounting (financial) statements of the insurer are used.
After completing Chapter 18, the student will:
know
- fundamentals of financial stability of an insurance company;
- the concept of the solvency of the insurance company;
- the main legislative and regulatory acts that establish requirements for the financial stability and solvency of the insurance company;
be able to
- characterize the main indicators of the financial stability of the insurer;
- to determine the minimum size of the authorized capital of insurers of various specializations;
- distinguish between the concepts of "solvency" and "financial stability";
- to determine the standard and actual size of the insurer's solvency margin;
have an idea
- on the analysis of the financial condition of the insurance organization;
- on the calculation of the degree of shortage of funds of the insurance company, the level of profitability of its work and the level of profitability of insurance premiums;
- on the assessment of the solvency of the insurance company.
Financial stability of an insurance organization
Financial stability of the insurer - this is the ability of the insurer to timely and in the prescribed amount to fulfill the obligations assumed to all entities at the expense of its own and borrowed funds. The basis for the financial stability of insurers are:
- 1) economically justified insurance rates;
- 2) insurance reserves sufficient to fulfill obligations under contracts of insurance, coinsurance, reinsurance, mutual insurance;
- 3) own funds;
- 4) reinsurance.
Insurers (with the exception of mutual insurance companies) must own a fully paid authorized capital, the amount of which must not be lower than the minimum authorized capital established by the Law on Insurance.
Thus, the financial stability of the insurer is achieved:
- an increase in the authorized capital and other own funds of the insurance organization;
- the use of correctly calculated, differentiated and flexible enough insurance rates;
- formation of insurance reserves that guarantee insurance payments in accordance with the procedure established by regulatory and methodological documents;
- compliance with the standard of maximum liability of the insurer for a particular risk;
- reinsurance, co-insurance of large risks;
- compliance with the standard size of the ratio between assets and liabilities of the insurer;
- reduction of accounts receivable and payable.
There are certain indicators to assess
the financial condition of the insurance company. Depending on their values, four states of the organization's finances are distinguished:
- sustainable;
- unstable;
- borderline;
- financial insolvency.
When the minimum permissible values \u200b\u200bof financial stability indicators are reached, a further reduction in financial resources may lead to insolvency and bankruptcy of the insurance organization.
The state of the organization's finances is characterized by certain characteristics, such as solvency, liquidity, deviations from financial standards, balance sheet structure, degree of adaptation to the environment. The extreme points of the financial condition of the insurance organization are financial stability and insolvency. In addition, there are two more transition states: unstable and borderline (threshold).
If an insurance organization cannot carry out insurance payments, payments to the budget and current payments, then such its financial condition is determined as borderline. This state is a threshold, since after that reorganization or bankruptcy is possible. Financial insolvency is characterized by the absence of all signs of financial stability. Reorganization is considered as a variant of this state, allowing the restoration of financial stability.
The financial stability of an insurance organization is influenced by both external and internal factors. External factorsinclude such parameters of the external environment that the organization cannot change and is forced to adapt to them. In management, external factors are considered as “framework” conditions, i.e. restrictions taken into account when mobilizing internal resources and forming the financial and economic policy of the organization. External factors include the general state of the national economy, the legal framework, the current taxation system, forms of state regulation of insurance activities, the situation in the insurance and financial markets, the solvency and consumer preferences of the population, etc.
TO internal factors ensuring financial stability includes the own characteristics of the insurance organization, which, in principle, can be controlled by it. Internal factors include the nature of the insurance company's specialization, organizational structure, balance of the insurance portfolio, tariff, reinsurance and investment policies, etc. Internal opportunities should be used in such a way as to effectively resist negative influences and take full advantage of the favorable effects of external factors.
Achieving financial sustainability in the field of insurance is somewhat different from what is being done to achieve this goal in other sectors of the economy. A non-insurance organization, using borrowed funds, as a rule, knows exactly when and how much it needs to pay to its business partners.
This is not the case in insurance companies. The insurer forms the bulk of its assets at the expense of borrowed funds. However, he can estimate the timing and size of forthcoming payments to policyholders only with a certain probability. In this regard, the insurer, when fulfilling its obligations, focuses not only on the funds of insurance reserves, specially intended for the implementation of insurance payments, but also on its own funds, free from the fulfillment of other obligations.
In accordance with paragraph 3 of Art. 25 of the Law "On the organization of insurance business in the Russian Federation" insurers must have a fully paid authorized capital, the amount of which must not be lower than the statutory minimum authorized capital. The minimum amount of the authorized capital (MC t | p) of the insurer is determined on the basis of the base size of its authorized capital (MCb az) and coefficients (to), established depending on the specialization of insurers for insurance objects and their combination:
to - 1 - for insurance against accidents and illnesses, health insurance; to \u003d 1 - for insurance against accidents and illnesses, health insurance, property insurance, civil liability insurance, insurance of business risks; k \u003d 2 - for life insurance; k \u003d 2 - for the implementation of life insurance, insurance against accidents and diseases, health insurance; k - 4 - for the implementation of reinsurance, as well as insurance in combination with reinsurance.
From January 1, 2012, the size of the minimum authorized capital of an insurance company has been increased to 120 million rubles. taking into account the existing coefficients (previously it was 30 million rubles). The basic size of the authorized capital of an insurer that carries out exclusively medical insurance is set at 60 million rubles.
Under financial stability an insurance company should be understood as the stability of its financial position, provided by a sufficient share of equity capital as part of funding sources.
An external manifestation of the financial stability of an insurance organization is its solvency - the ability of the insurer to fulfill the obligation to pay the sum insured or insurance indemnity to the policyholder or the insured person under insurance contracts at any time of activity. It is the solvency of insurance organizations that is the main object of control by the insurance supervisory authorities.
According to Chapter 3 of the Insurance Law guarantees to ensure the financial stability of the insurer are:
Economically sound insurance rates;
Insurance reserves sufficient to fulfill obligations on insurance coinsurance, reinsurance, mutual insurance
Own funds;
Reinsurance.
Insurance reserves and the insurer's own funds must be provided with assets that meet the requirements of diversification, liquidity, repayment and profitability. Own funds of insurers (with the exception of mutual insurance companies) include authorized capital, reserve capital, additional capital, retained earnings.
Insurers (with the exception of mutual insurance companies) must have fully paid authorized capital, the amount of which must not be lower than the minimum amount of the authorized capital established by the Law on Insurance.
The minimum size of the authorized capital of an insurer that carries out exclusively medical insurance is set at 60 million rubles. The minimum size of the authorized capital of another insurer is determined on the basis of the basic size of its authorized capital, equal to 120 million rubles, and the following coefficients:
1 - for insurance against accidents and diseases, health insurance, property insurance, civil liability insurance;
2 - for the implementation of life insurance, insurance against accidents and diseases, health insurance;
4 - for the implementation of reinsurance, as well as insurance in combination with reinsurance.
A change in the minimum size of the authorized capital of an insurer is allowed only by federal law no more than once every two years, with the obligatory establishment of a transition period.
The introduction of borrowed funds and pledged property into the authorized capital is not allowed.
The insurer (with the exception of a mutual insurance company) can transfer the obligations assumed by it under insurance contracts (insurance portfolio) to one insurer or several insurers (replacement of the insurer) who have licenses to carry out those types of insurance for which the insurance portfolio is transferred, and have sufficient own means, that is, meeting the requirements of solvency, taking into account the newly assumed obligations. The transfer of the insurance portfolio is carried out in the manner prescribed by the legislation of the Russian Federation.
Simultaneously with the transfer of the insurance portfolio, the transfer of assets is carried out in the amount of insurance reserves corresponding to the transferred insurance liabilities.
Under financial stability an insurance organization understands the ability to fulfill its obligations with all the property it has. Naturally, the insurer has external and internal obligations. External obligations are accepted to be subdivided into insurance and non-insurance (others). Unless otherwise specifically stated, then due to the special importance of insurance obligations, financial stability is primarily understood as the ability of the insurer to fulfill its insurance obligations 1.
The financial stability of the insurance organization is ensured by sufficient and paid authorized capital, insurance reserves adequate to the assumed obligations, as well as the adopted reinsurance system. The use of the reinsurance system assumes that only those risks remain on the insurer's responsibility for which it can fulfill obligations based on its financial capabilities. The criterion for the financial stability of the insurer is usually considered to be the sufficiency of insurance reserves and own free funds to fulfill the obligations of the insurer. The most important indicator of the financial stability of the insurer, its reliability, is the solvency.
Under solvencyan insurance organization is understood to be its ability to fulfill its obligations at any given time.As in the case of financial stability, when assessing solvency, it is usually, unless otherwise specified, understand its ability to fulfill, first of all, insurance obligations.
The condition of the insurer's solvency is more significant than the condition of financial stability, since it imposes an additional requirement on the company's assets.
_______________________
1 Recently, the practice of selling not an insurance product, but a so-called financial product, which, along with insurance, includes other services of a financial and credit nature, has been developing more and more in the global insurance market. For this reason, the importance of other (non-insurance) liabilities of an insurance organization increases, which makes it necessary to take into account all external liabilities, and not just insurance, when assessing its financial stability and solvency. Internal obligations of the insurance organization are not particularly specific.
In addition to the fact that they should be sufficient, they should be liquid to the extent necessary to fulfill insurance obligations at any given time.
19.4. Assessment of the solvency of an insurance organization
The financial security for the fulfillment of liabilities on insurance payments for the insurer is formed by insurance reserves, as well as free from liabilities own funds, called net assets. The significance of the last element is due to the fact that insurance reserves, as a rule, are not enough to fulfill insurance obligations. This is primarily due to the random nature of insurance payments and the fact that in their professional activities the insurer is constantly faced with technical, non-technical and investment risks (Figure 19.3)
Since insurance reserves are calculated according to special methods, and therefore their size is sufficiently determined, the assessment of the solvency of an insurance organization can be reduced to an assessment of the adequacy of the amount of the insurer's own free funds (net assets), which, together with the assets covering insurance reserves, are used to fulfill insurance obligations ( fig.19.4)
The excess of the insurer's assets over its liabilities confirms the existence solvency margin (net assets of the insurer) - the positive difference between all the assets of the insurer and its liabilities, which is used to fulfill insurance obligations in the event of insufficient insurance reserves. The essence of the current methodology for assessing the solvency of an insurance organization is reduced to comparing the actual size of the solvency margin (the actual size of the insurer's net assets) with its standard size calculated according to the data of the assessed insurance organization in accordance with the guidance materials.
Solvency assessment is carried out in three stages.
Stage 1. Calculation of the standard size of the solvency margin (the standard value of the net assets of the insurer), due to the specifics of concluded insurance contracts, as well as the volume of obligations assumed to fulfill.
The instruction assumes an assessment of the solvency for an insurance company engaged in life insurance and other types of insurance at the same time, therefore, the total standard size of the solvency margin is calculated as the sum of two terms - for life insurance and types of insurance other than life insurance. For other types of insurance, than life insurance, the private standard size of the solvency margin Nrv., Is calculated by the formula:The P1 indicator indicates the minimum amount of net assets that an insurance company should have based on its insurance obligations. It is calculated using the formula:
where PR is the amount of insurance premium for the period for which the solvency is assessed (usually one year) under insurance contracts, co-insurance and accepted for reinsurance, reduced by the annual amount of returned insurance premiums, deductions to the reserve of preventive measures and other deductions provided for by law.
The P 2 indicator indicates the minimum amount of net assets that an insurance company should have based on the insurance obligations it fulfilled. It is calculated using the formula:
where SV is the sum of the average annual changes for the previous three years in the reserves of losses and actual insurance payments under insurance contracts, co-insurance and accepted for reinsurance, minus payments received under recourse claims.
The adjustment factor k ex is calculated for the year preceding the reporting date as the ratio of the amount of net insurance payments (total payments less the participation of reinsurers) and the net changes in provisions for losses (total changes less participation of reinsurers) to the total amount of insurance payments of changes in provisions for losses. In the case when the actual values \u200b\u200bof the coefficient does not exceed 0.5, its value is taken to be 0.5; if there was no reinsurance, the coefficient is 1.
For life insurance, the standard size of the solvency margin Nszh is calculated by the formula:
where RSZ is the reserve for life insurance as of the last reporting date; k is a correction factor calculated as the ratio of the life insurance provision minus the participation of reinsurers to the value of the specified provision. In the case when the actual value of the coefficient is less than 0.85, its value is assumed to be 0.85; if there was no reinsurance, the coefficient is 1.
The standard size of the total solvency margin N is calculated by the formula:
If the company is engaged in life insurance and other types of insurance and the calculated standard size of the solvency margin N is less than the minimum amount of the authorized capital provided for by law, N is set equal to this statutory value.
Stage 2.Determination of the actual size of the solvency margin of PLF-net assets.
According to Russian legislation, the actual size of the solvency margin, which indicates the actual solvency, is calculated using the formula:
Mpf \u003d (UK + DK + RK + NP) - (NU + ZA + AP + NA + DZP), where UK is the authorized capital; DC-additional capital; RK-reserve capital; NP - undistributed profit of the reporting year and previous years, OU - uncovered losses of the reporting year and previous years; FOR - debt of shareholders (participants) on contributions to the authorized capital; AP - own shares purchased from shareholders; NA - intangible assets; DZP - overdue receivables.
Stage 3. Comparison of the actual size of the solvency margin with the standard.
If the actual solvent standard is Н, i.e. if the ratio PLf ≥ Н is observed, it can be concluded that the insurance organization is solvent; Otherwise, control over the financial recovery of the insurer; carried out by the supervisory bodies of insurance activities.
Within the framework of the European Union, the assessment of solvency is carried out separately for insurance companies dealing with risky types of insurance and insurance companies dealing with life insurance. The accession of the Russian Federation to the WTO and the European Union presupposes, in particular, that the assessment of the solvency of Russian insurance companies must be brought in line with European and world standards.
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