Financial sustainability management of the insurance company: case of Ukraine

Abstract

In the current conditions of the Ukrainian economy, which is characterized by crisis phenomena and frequent changes in legislation, the insurance organizations are facing a number of difficulties in maintaining their financial sustainability. Moreover, these processes take place under the increased requirements for solvency of insurers. However, a significant part of domestic insurance companies is financially unstable, which is conditioned not only by the lack of funds, but also by the low level of management. This situation hinders the further development of the insurance market in Ukraine and has a negative impact on all areas of the domestic financial system and prevents it from successful integration into the European financial field. In order to address this problem, it is necessary to distinguish the key groups of risks that affect the financial sustainability of insurance organizations, among which there are the following: insurance, strategic, market risk, risk of inefficient capital structure, risk of limiting the insurance company’s liquidity, tax risk, investment risk, operational risk, the risk of ineffective organizational structure of the enterprise, and information risk. It should be noted that under conditions of changing environment, the impact of these risks only increases, and therefore the task of minimizing the impact of these risks on the activities of insurance companies is highly important. Accordingly, the authors of the article proposed a four-stage strategy to manage the financial sustainability of the insurance company, the purpose of which is to identify the risks of limiting the insurer’s financial sustainability, their qualitative and quantitative assessment, as well as the development and implementation of appropriate measures to minimize and eliminate unacceptable consequences.

Business sustainability: Functions of financial behavior, technology, and knowledge

“…This study implies that owners or managers of small and medium businesses should pay attention to their financial knowledge to improve financial performance. Risk management that is carried out correctly can be done by making investments, buying insurance, and conducting financial audits to maintain financial sustainability (Pikus et al, 2018). Financial sustainability in MSMEs is also a characteristic of looking at fi-nancial conditions and the direction of strategic business plans (Azarenkova et al, 2018).…”

Leverage, Product Diversification, and Performance of Life Insurance Companies in Indonesia

“…Insurance companies change product lines to adapt to crisis situations. As an effort to reduce policy costs, insurance companies can offer policies with limited risk, such as special catastrophic events or fixed payment models in order to expand product sales Pikus et al (2018). An insurance company with an efficient product diversification profile will be able to reduce its risk portfolio but also increase the capital ratio because an increase in business lines will require more capital to meet regulatory requirements.…”

“…Environmental change has an impact on increased risk, so the task of minimizing the impact of these risks on the activities of insurance companies is very important. Insurance companies need to develop a corporate financial management strategy, identify risks for mitigating the impact on the business, perform qualitative analysis and quantitative assessments as well as developments and implementations in accordance with the objectives of minimizing or even eliminating unacceptable consequences (Pikus et al, 2018). Insurance organizations face several difficulties in maintaining financial sustainability, such as the current crisis and regulatory changes that require a certain level of solvency.…”

“…Insurance organizations face several difficulties in maintaining financial sustainability, such as the current crisis and regulatory changes that require a certain level of solvency. Most domestic insurance companies are financially unstable, which is caused not only by the lack of funds, but also by low levels of management (Pikus et al, 2018).…”