Document Type : Original Research Paper
Authors
1 Faculty of Insurance Research Institute, Iran
2 Department of Financial Management, University of Tehran, Iran
Abstract
Purpose: This article aims to investigate the effect of production changes caused by the corona pandemic on the liquidity situation of the insurance industry.
Methodology: For this reason, first assuming the entry of these changes through the production channel (according to observations) on the economy and its transfer to production in the insurance industry, the effect of production changes caused by the Corona pandemic through the extraction of theoretical and long-term relationships of insurance premium production with The economy and the estimation of its coefficients were obtained using the co-accumulated vector autoregression model (with panel data) and further considering the different scenarios for possible changes caused by credit risk and price risk as other effects of the Corona pandemic (through the release of productive liquidity with production reduction) the status of the liquidity index of insurance companies in normal and critical conditions in short-term and long-term conditions has been analyzed and investigated.
Findings: The results showed that the decrease in the liquidity index of the insurance industry in short-term and critical conditions in case of a decrease in global GDP growth by 0.5% or 2.8% is equal to 34.14 and 34.18, respectively, and the decrease in the liquidity index in long-term and critical conditions is equal, respectively. 33.07 and 33.12.
Conclusion: The above results confirm that insurance companies should increase the ratio of cash balance and assets with high liquidity in the short term in order to cover the mentioned risk in critical conditions. Also, if the aforementioned conditions persist in the long term, they should put on the agenda to increase the holding ratio of liquid assets in the form of gold or stable foreign currencies.
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