Implementation of Solvency I and risk management in five Security companies in Kosovo (2016 – 2018)

• Pages: 141-150
• Date: 01 January 2021
• Published date: 01 January 2021
• Author: Ibrahim Mala
• Subject Matter: Derecho Público y Administrativo

European Journal of Economics, Law and Social Sciences

IIPCCL Publishing, Graz-Austria

Vol. 5 No. 1

January, 2021

ISSN 2519-1284

Acces online at www.iipccl.org

141

Implementation of Solvency I and risk management in ve

Security companies in Kosovo (2016 – 2018)

PhD (C.) Ibrahim Mala

Abstract

Commonlly the application of Solvency in insurance companies is used as a risk management

tool which may threaten these companies. Solvency mainly applies to all risks that insurance

companies in Kosovo are exposed to. Through the implementation of Solvency I, the possibility

for insurance companies to lose solvency in relation to the obligations and risks undertaken is

reduced. Implementation of Solvency I and other early warning indicators (EWT) contributes

to the degree of risk identication, assessment and selection of methods for reducing and

preventing risks and unexpected losses.The implementation of Solvency I is based on the

Regulation on the calculation of the minimum solvency limit, capital adequacy and guarantee

fund for non-life insurers. This regulation is based on the European Solvency Directive I. The

regulation of “Calculation of the minimum solvency limit, capital adequacy and guarantee

fund for non-life insurers” (Solvency) is approved by the CentralBank of Kosovo on 23

February 2017.

Pursuant to this Regulation, the Solvency (Solvency I) is applied, which is calculated on

the basis of premiums and claims. In addition to risk assessment for individual insurance

companies, indicators from the implementation of Solvency I can also be used to assess the

nancial position, compared to other insurance companies (competitors) with the insurance

sector as a whole. This analysis assesses the ability of an insurance company to meet solvency

capital requirements (Solvences i), assets covered by technical provisions and other early

warning indicators.

As a result, the implementation of Solvency I in this paper was is implemented based on

the nancial statements of insurance companies for three years (2016–2018), using indicators

for ve companies, including: Sigura, Ylliria, Elsig, Kosova e Re and Sigma. Companies are

selected based on: composite criteria (to include non-life insurance in the company portfolio),

scope and diversication of insurance portfolios (large insurance companies with a diversied

portfolio structure), as well as the existence of a developed asset structures (to represent

dierent forms of wealth).

Keywords: Solvency I and risk management, Security companies, Kosovo.

Introduction

The capital adequacy of an insurance company is a key factor in maintaining solvency.

Possessing a sucient amount of capital, helps to cope with severe business crises as

a result of unexpected risks and unforeseen losses.

Capital adequacy enables the insurance company to survive and ensure business

continuity, even in the event of signicant losses. In this case, capital serves for risks

that could not have been foreseen, in whole or to a certain extent, making it impossible

or unreasonable to undertake preventive risk management techniques. For any

insurance company, capital is needed to ensure that liabilities to policyholders are