The financial insolvency risk of the insurance company
E.A. Konnikon,
аспирант кафедры «Экономика и управление предприятиями», Санкт-Петербургский Ггосударственный Экономический университет (191023, Россия, г. Санкт-Петербург, ул. Садовая, 21; e-mail: konni-kov.evgeniy@gmail.com)
E.V. Mokeichev,
аспират кафедры «Страхования и управления рисками», Санкт-Петербургский Государственный Экономический университет (191023, Россия, г. Санкт-Петербург, ул. Садовая, 21; e-mail: mokeychev@gmail.com)
Аннотация. Данная статья посвящена изучению инструментов регулирования финансового состояния компаний в различных отраслях финансового рынка. На базе анализа законодательной и методической баз устанавливается связь между ликвидностью предприятий производственных отраслей и резервной политикой страховщиков. Авторами предлагается идея применения основных принципов, характерных для опционов, для прогнозирования ликвидности экономических субъектов. Изменяя параметры в модели Блэка-Шоулза на основные составляющие финансового состояния компании, авторы получают новые инструменты прогнозирования ликвидности как производственных предприятий, так и страховщиков.
Abstract. This article is devoted to the study of regulatory instruments of financial situation of companies in different sectors of the financial market. A link between liquidity of enterprises of manufacturing industries and reserve policy of insurers was established on the basis of the analysis of legal and methodological bases. Authors propose the idea of applying the basic principles specific to the option, to predict the liquidity of economic subjects. By changing the parameters in the Black-Scholes model for the main components of a company's financial condition, the authors receive new liquidity forecasting tools of both industrial enterprises and insurers.
Ключевые слова: финансовая несостоятельность, риск, коэффициент ликвидности, финансовое состояние, страховая компания, модель Блэка-Шоулза.
Keywords: financial insolvency, risk, liquidity ratio, financial condition, insurance company, Black-Scholes
model.
At the end of the third quarter of 2015 we can talk about remaining high level of instability in Russian economy. The previous negative dynamics of oil prices and the deterioration of international relations provoked a significant weakening of ruble and growth of key rates, which in turn has led to instability in the banking sector. The banking sector was followed by other sectors of the financial market, where deterioration of the financial condition of the participants can be observed. In the sector of real production that is expressed by reduction in liquidity. Specific industries such as insurance faced growing loss ratio - a major indicator of the effectiveness of their activities. This fact creates a need in strengthening control of the enterprises over their own financial condition, and of state authorities over the totality of market relations elements. This fact prevents innovative development of both enterprises and industries in general. [9]
Methodologically and theoretically the work is based on the works of Russian scientists - economists O.V. Efimova, M.V. Melnik, G.P. Ivanov, A. L. Lelchuk, A. L. Orlanyuk-Malitskaya, V. E. Gavrilo-va at al., federal laws, and materials of the periodical press. Regulatory issues of the financial condition in various sectors of the economy have recently become an urgent topic for discussion in scientific community. Nowadays active measures to strengthen and standardize the monitoring of the activities of economic entities are applied. For example, in the insurance field it is planned to introduce a new chart of accounts, similar to bank ones and to change insurers over to international standards of financial reporting. Many of the measures used today in the financial market are quite crucial in nature and will contribute to the profound changes in the nature of the activity of companies and enterprises. As a con-
sequence there is a need to develop tools summing classic ways of managing financial condition under the new criteria. This result can be obtained by means of interpenetration of previously unrelated fields of knowledge and financial indices.
One of the main indicators characterizing the financial condition in the real sector is the indicator of liquidity. Liquidity within an enterprise is characterized by three factors: the absolute liquidity ratio, quick ratio, current ratio.
These ratios reflect the ability of an organization to cover its own obligations due to a specific part of the assets. For absolute liquidity ratio and quick ratio laws and guidelines establish norms of their minimum values. Exceeding them indicates a favorable financial condition of the company. For the current ratio at the moment there is no absolute secure of the normal value. The legislative framework of financial condition regulation is reflected in the following legal acts:
1. Federal Law of 26 October 2002. №127-FL "On Insolvency (Bankruptcy)";
2. Letter from the Russian Ministry of Economy of September 16, 1993 №ASH-598 / 6-210 "On the development of rehabilitation procedure, reorganization and dissolution of insolvent enterprises";
3. An order from the Ministry of Economy of Russia of October 1, 1997 №118 «On approval of recommendations for reform of the enterprises (organizations)";
4. Instruction of Bank of Russia of January 16, 2004 №110-I "On mandatory ratios of banks";
5. Government Decree of December 27, 2004 №855 «On approval of the Provisional Rules of the arbitration manager checking for signs of fictitious and deliberate bankruptcy";
Journal of Economy and entrepreneurship, Vol. 9, Nom. 9-2
E.A. Konnikon, E.V. MokeichevThe financial insolvency risk of the insurance company
6. Order of Russian Ministry of Economic Development of 21 April 2006 №104 «On approval of the Methodology of the Federal Tax Service of accounting and analysis of financial condition and solvency of strategic enterprises and organizations."
If we turn to the analysis of financial condition in the non-manufacturing sectors, an insurance company can be taken as an example. Specificity of the commercial activity of the insurer, which implies the presence of a temporary gap between the fact of payment of insurance services and its provision as well as the presence of probability that the need for such a service will not arise, involves a unique approach to the management of their own liquidity, under which it is possible to understand the ability of the insurance company to settle losses on all realized risks that it has taken itself. [23] This uniqueness is expressed through creation and management of special insurance reserves. [7] The current list of insurers' reserves is used for the prevention of future payments, breaking received premiums for the duration of contracts and other balancing operation. It turns out that reserves of the insurance company can be considered as its assets that are created to meet the assumed obligations (risks). Thus, payment transactions related to production enterprises liquidity, in some way can be shifted to insurers, laying their reserves into the basis for calculating. [20]
Existing regulation of the financial state regulations in one way or another reflects the views of the legislature regarding the evaluation of the financial condition of an organization, particularly in matters relating to liquidity. However, none of the documents addresses the issue of liquidity forecasting. Under the orders of the Federal Office on Insolvency and Bankruptcy №31-P of 12 August 1994 the coefficient of restitution (loss) of paying capacity was introduced. This ratio is characterized by having a real opportunity for companies to recover (or lose) their paying capacity during a certain period. But, according to the authors, this ratio is not able with reasonable certainty to predict the level of liquidity of an organization. This is due to the fact that this ratio does not imply uncertainties. In turn, the current ratio is subject to a high degree of uncertainty, since it is the total of consequences of the company activities over time. The consequence of this is adaptation and reevaluation of future decisions by management that responds to changes in certain circumstances. Based on the theses it can be argued that the future in this case can be viewed as a set of alternatives that can reduce or add liquidity.
The main attribute of insurance is probability which is synonymous with the above-noted uncertainty. We can confidently assert that uncertainty in insurance can be traced to a greater extent than in manufacturing sector. Insurance reserves are created in order to mitigate this uncertainty. The main task of regulating the financial condition of an insurance company can be reduced to managing such reserves and forecasting their size.
The property of uncertainty is also inherent in options contracts. Option is the right to buy (or sell) a certain asset, called a base, at a fixed price in the future. [25] According to the theory of real options, world is characterized by variability, uncertainty, and competitive interactions among firms. Consequently, management of the company is forced to adapt to new conditions of operation of business. The word "option" in this case means initially invisible but ex-
isting in a latent form added value, which has an impact on the operating results. [24]
Abstracting from the concept of value, it can be argued that these statements are true to the company's liquidity, which in turn makes it possible to hypothesize that the future level of liquidity can be forecast identically to the calculation of the future price of the option. Based on the previously marked link between industrial enterprises liquidity and reserve policy of insurers, it can be argued that the methods of calculating the future value of an option can be used to forecast calculating the amount of the
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