Money, finances and credit

Improvement of the methodology for assessing the capital adequacy to cover the reinsurance default risk

Economic Annals-XXI

Economic Annals-ХХI: Volume 165, Issue 5-6, Pages: 152-156

Citation information:
Pukała R., Vnukova, N., Achkasova, S., & Smoliak, V. (2017). Improvement of the methodology for assessing the capital adequacy to cover the reinsurance default risk. Economic Annals-XXI, 165(5-6), 152-156. doi: https://doi.org/10.21003/ea.V165-30

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Ryszard Pukała
PhD (Economics),
Vice-Rector for Students,
Institute of Economics and Management,
Bronisław Markiewicz State Higher School of Technology and Economics in Jarosław
16 Czarnieckiego Str., Jarosław, 37-500, Poland
ryszard.pukala@interia.pl
ORCID ID: http://orcid.org/0000-0002-2943-8482

Nataliya Vnukova
D.Sc. (Economics),
Head of the Department,
Professor,
Simon Kuznets Kharkiv National University of Economics
9-A Nauky Ave., Kharkiv, 61166, Ukraine
vnn@hneu.edu.ua
ORCID ID: http://orcid.org/0000-0002-1354-4838

Svitlana Achkasova
PhD (Economics),
Associate Professor,
Simon Kuznets Kharkiv National University of Economics
9-A Nauky Ave., Kharkiv, 61166, Ukraine
svitlana.achkasova@m.hneu.edu.ua
ORCID ID: http://orcid.org/0000-0001-7233-0189

Viktor Smoliak
PhD (Economics),
Associate Professor,
Simon Kuznets Kharkiv National University of Economics
9-A Nauky Ave., Kharkiv, 61166, Ukraine
viktor.smoliak@m.hneu.edu.ua
ORCID ID: http://orcid.org/0000-0002-7135-4362

Improvement of the methodology for assessing the capital adequacy to cover the reinsurance default risk

Abstract. Introduction. The development of the insurance market in Ukraine is closely associated with the instruments used by domestic insurers to manage low capitalisation, including coinsurance and reinsurance services. Reinsurance helps insurance companies to take very large and expensive risks. Thus, the questions of generalisation of both national and international experience in default risk assessment of reinsurers in an insurance company and provision of recommendations to ensure reliability of activity of insurance companies are relevant. The purpose of the paper is to provide recommendations to improve capital adequacy assessment concerning the coverage of the reinsurance default risk. Methodology. The methodological basis of this study is the theory of insurance and insurance concepts. Scale measurement of capital adequacy of insurance companies relevant to the coverage of the reinsurance default risk was conducted by using methods of mathematical statistics. Results. Based on the example of 50 Ukrainian insurance companies, we have conducted scale measurement of capital adequacy to cover the default risk of reinsurers for the years of 2015-2016. The originality of the research lies in the improvement of capital adequacy assessment concerning the coverage of the reinsurance default risk, which, unlike the existing methodology, considers the designed scale and criteria of the capital adequacy indicator of the insurance company to cover the reinsurance default risk at «inadequate», «adequate», «medium», «good» and «excellent» levels. Conclusions. The practical value of the paper lies in the proposed approaches to improve capital adequacy assessment concerning the coverage of the reinsurance default risk, which will enhance the level of reinsurance and facilitate the fulfillment of obligations by insurance companies.

Keywords: Reinsurance Default Risk; Methodology; Scale Measurement; Capital Adequacy; Insurance Company

JEL Classification: F36; F38; F65; G22; G28

DOI: https://doi.org/10.21003/ea.V165-30

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Received 24.05.2017

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