Loading...
Causes Of Financial Distress In Saudi Insurance Industry
AlQathmi, Joud
AlQathmi, Joud
Citations
Altmetric:
Type
Supervisor
Subject
Date
Collections
Research Projects
Organizational Units
Journal Issue
Abstract
The insurance industry in Saudi Arabia has grown significantly in recent years, but this expansion has also introduced additional challenges. Financial distress, which may be brought on by a number of circumstances, is one of the biggest problems insurance businesses encounter. In the following paper, we examine the factors that contribute to and determine financial difficulties in the Saudi Arabian insurance sector. Our investigation is limited to a sample of 20 Saudi Arabian insurance firms. To investigate the elements that lead to financial hardship in this sector, we utilize a panel data set spanning the years 2015 to 2020. Our findings suggest that important predictors of financial distress in the Saudi Arabia insurance industry include variables including capital adequacy, liquidity, and profitability. Additionally, we discover that macroeconomic factors like inflation and GDP growth significantly affect financial distress. Our findings specifically imply that lower levels of financial distress in the insurance sector are related with better GDP growth rates and lower inflation rates. Also, we look into how regulatory issues affect financial hardship in the Saudi insurance sector. Our findings imply that regulatory elements like market structure and solvency standards have a major effect on financial distress. Particularly, we show that insurance businesses are less likely to encounter financial trouble if they operate in a more competitive market and if they are subject to tougher solvency rules. Overall, our findings offer understanding into the elements that fuel the financial crisis in the Saudi insurance sector. Our study's findings indicate that in order to lower their risk of financial difficulty, insurance businesses should concentrate on maintaining appropriate capital and liquidity levels as well as increasing profitability. To lessen the probability of financial difficulty in the business, regulators may also take into account enacting stronger solvency criteria and encouraging competition in the insurance market.