Financial Flexibility and Free Cash Flow with Solvency Based on Risk Based Capital in Insurance Companies

Document Type : Research Paper

Authors

1 FACULTY OF ACCOUNTING ,SOUTH TEHRAN BERANCH, IALAMIC AZAD UNIVERSITY,

2 Deputy Advisor for management Development and Resource Central Insurance , Tehran, Iran.

3 Head of Management Accounting, Saipa Automotive Industry Research and Innovation Center

4 Tax auditor

Abstract

Monitoring the financial solvency of insurance companies has been one of most important tasks of central insurance. By drafting regulation No.69 to protect the rights of insurers, solvency based on risk-based capital insurance companies periodically are surveyed at five levels. Depending on the location of insurance companies at a level of less than one, they are obligated to provide financial recovery plan for the next three financial years and present to central insurance. The purpose of this research is investigating the relationship between financial flexibility and free cash flows with solvency based on risk- based capital in insurance companies. Based on this, the applicability of the mentioned regulation and ability of insurance companies with financial flexibility and free cash flows in facing of unpredictable and unexpected conditions in the period between 2014 to 2018 were examined. Data collection is census using descriptive inference and comparison of means and correlation analysis were used to analyze the results of research hypotheses. The results indicate a significant and inverse (negative) relationship between financial flexibility and solvency based on risk-based capital. Also, the results indicate that there is a significant and direct (positive) relationship between free cash flows and solvency based on risk-based capital in insurance companies.

Keywords

References

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History

  • Receive Date: 04 July 2020
  • Revise Date: 15 August 2020
  • Accept Date: 21 October 2020

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