The Determinants of Financial Performance in the Romanian Insurance Market

The financial analysis of a company is an important tool used by actuaries in the process of decision-making on underwriting and investment activities of the insurance company. The financial performance of insurance companies is also relevant within the macroeconomic context since the insurance industry is one of the financial system ’ components, fostering economic growth and stability. The financial performance of insurance companies can be analyzed at micro and macroeconomic level, being determined both by internal factors represented by specific characteristics of the company, and external factors regarding connected institutions and macroeconomic environment. This study attempts to analyze the determinants of the financial performance in the Romanian insurance market during the period 2008–2012. According to the final results achieved by applying specific panel data techniques, the determinants of the financial performance in the Romanian insurance market are the financial leverage in insurance, company size, growth of gross written premiums, underwriting risk, risk retention ratio and solvency margin. Key words Financial performance, Romanian insurance market, panel data, fixed effects model, random effects model