Yukhymenko V. Ensuring solvency of insurance companies in Ukraine.

In the thesis, theoretical approaches were improved and practical recommendations developed to ensure solvency of domestic insurance companies. A wider interpretation of the “solvency of insurance organizations” concept is suggested to include not only insurance, but also other obligations of the insurer in its insurance, investment, and financial activities. The outcomes determines that depending on what basics lies in the term of "financial stability" and "solvency" of the insurers they are identical or not. The solvency refers to the ability of an insurance organization to fulfill its obligations over a period. The financial stability differs from the concept of solvency from the point of ability to fulfill obligations at any moment of time. The notions of "financial stability" and "solvency" are identical if solvency defines as the ability to fulfill obligations not only in the current, but also in all subsequent periods (prospective solvency). Key factors influencing solvency of insurance organizations are arranged as for a possibility to regulate the factors at the level of the insurance company. The study ascertains legislative requirements for solvency of the native insurance organizations and explores a possible further development of the Ukrainian insurance market in the context of the introduction of new standards. The assessment of solvency of insurance companies of Ukraine was made and the actual solvency margin most of companies was excessed. It is determined insufficient level of capitalization of insurance business is one of the restraining factors of further stable development and efficient functioning of insurers. The research discusses retrospective aspects of the development of the solvency system of insurers in the territory of the European Union and outlines main stages of its spreading. The thesis exposes main provisions of the 2009/138/EU Directive (Solvency II) and discloses key differences from Solvency I. The types of risks that the insurance company faces in the course of its activity are generalized. A phased introduction of elements of risk-oriented regulation of the insurance sector is proposed to secure overall stability and integrity of the insurance market, effectively protect interests of policyholders and increase competitiveness of the national insurance organizations. The full introduction of the Solvency II methodology in Ukraine will require major changes from insurers, the national regulatory authority and the legislative framework. Therefore, implementation of whole Solvency II standards in Ukraine in the near future seems not realistic. The undertake analysis discovered that the insurance companies’ tests of early warning were inappropriate for adequate and timely identification of the insolvent insurers. The study developed a system of indicators reflecting insolvency of the insurance organizations in its early stages. The thesis puts forward an idea of dividing the indicators of insolvency of insurance organizations into the “yellow” and “red” zones to increase the regulator’s flexibility in using various instruments of influence depending on the level of hazard of the discovered status the insurance organization. It has been shown that provided the insurers are unable to deal with the financial difficulties, they are migrating from the yellow to the red zone. The study suggests a methodological approach to assessing the insurer's own capital, taking into account the planned volumes of insurance premiums to identify the control levels (sufficient, strategic, preventive and critical), which enable making prompt management decisions aimed at ensuring and maintaining the insurers’ solvency. The system of financial reporting of insurance organizations should be changed by using the international format of business reporting XBRL, which improves the transparency, reliability and quality of reporting data of the insurers, as well as eliminates duplication of information.