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Liquidity risk situation of turkish insurance industry and firm specific factors affecting liquidity

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2010
Balkanlı, Ayşegül
Recent changes in the insurance regulations and laws in Turkey lead insurance industry to gain further importance and turn the insurance industry one of the rising sectors in financial markets. However, while these favorable events for the insurance industry takes place in Turkish markets, on the global markets the economic crisis initiated with the collapse of US sub-prime mortgage markets deepened and the credit crunch arose in the aftermath. In the times of credit stress having good liquidity base is important for the firms. In recent economic crisis, liquidity related troubles resulted in bailouts or takeovers of giant financial companies. In order to prevent negative consequences of inadequate liquidity and to sustain financial stability, having appropriate level of liquidity is especially crucial for financial companies like insurers. In this thesis it is aimed to analyze the Turkish insurance sector’s liquidity condition for the period between 2002 and 2008 with the help of liquidity ratios. Considering the nature of the business, a distinction is made between “non-life” and “life” insurance companies while assessing their liquidity ratios. Furthermore, panel data regression analysis is conducted to determine the firm specific factors affecting the liquidity decisions of non-life insurers operating in Turkey.