| Title: | New suptech tool of the predictive generation for insurance companies : the case of the European market |
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| Authors: | ID Jagrič, Timotej (Author)
ID Zdolšek, Daniel (Author)
ID Horvat, Robert (Author)
ID Kolar, Iztok (Author)
ID Erker, Niko (Author)
ID Merhar, Jernej (Author)
ID Jagrič, Vita (Author) |
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| Files: |  Jagric-2023-New_Suptech_Tool_of_the_Predictive.pdf (2,55 MB)
MD5: 7B47D0D04588A4E6F921663F6F4C5D14
 https://doi.org/10.3390/info14100565
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| Language: | English |
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| Work type: | Scientific work |
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| Typology: | 1.01 - Original Scientific Article |
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| Organization: | EPF - Faculty of Business and Economics
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| Abstract: | Financial innovation, green investments, or climate change are changing insurers’ business ecosystems, impacting their business behaviour and financial vulnerability. Supervisors and other stakeholders are interested in identifying the path toward deterioration in the insurance company’s financial health as early as possible. Suptech tools enable them to discover more and to intervene in a timely manner. We propose an artificial intelligence approach using Kohonen’s self-organizing maps. The dataset used for development and testing included yearly financial statements with 4058 observations for European composite insurance companies from 2012 to 2021. In a novel manner, the model investigates the behaviour of insurers, looking for similarities. The model forms a map. For the obtained groupings of companies from different geographical origins, a common characteristic was discovered regarding their future financial deterioration. A threshold defined using the solvency capital requirement (SCR) ratio being below 130% for the next year is applied to the map. On the test sample, the model correctly identified on average 86% of problematic companies and 79% of unproblematic companies. Changing the SCR ratio level enables differentiation into multiple map sections. The model does not rely on traditional methods, or the use of the SCR ratio as a dependent variable but looks for similarities in the actual insurer’s financial behaviour. The proposed approach offers grounds for a Suptech tool of predictive generation to support early detection of the possible future financial distress of an insurance company. |
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| Keywords: | European insurance market, suptech, supervision, financial deterioration identification, neural networks |
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| Publication status: | Published |
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| Publication version: | Version of Record |
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| Submitted for review: | 07.09.2023 |
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| Article acceptance date: | 11.10.2023 |
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| Publication date: | 14.10.2023 |
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| Publisher: | MDPI |
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| Year of publishing: | 2023 |
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| Number of pages: | Str. 1-14 |
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| Numbering: | Letn. 14, Št 10, št. članka 565 |
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| PID: | 20.500.12556/DKUM-87705  |
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| UDC: | 331.1 |
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| ISSN on article: | 2078-2489 |
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| COBISS.SI-ID: | 169164291 |
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| DOI: | 10.3390/info14100565 |
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| Publication date in DKUM: | 25.03.2024 |
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| Views: | 398 |
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| Downloads: | 52 |
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| Metadata: |    |
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| Categories: | Misc.
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