Economic crisis and determinants of solvency in the insurance sector: new evidence from Spain

This paper analyzes the factors that determine the solvency of the insurance companies operating in Spain. The selected time span, from 2008 to 2015, encompasses a period of economic instability characterized by record low interest rates and low or even negative economic growth. Using a dynamic panel data model, we conclude that actual solvency margins are positively related to profitability, underwriting risk, and a mutual-type organization but inversely related to size, reinsurance use, longer-tailed business, and life insurance specialization. We also find that less concentrated markets and the context of an economic crisis decrease solvency margins.