Capital and risk from the perspective of solvency regulation of Moroccan insurance companies Dynamic estimation using simultaneous equations with panel data

Abstract

This research paper attempts to answer the following questions : Has capital and risk management in Moroccan insurance companies functioned inefficiently over the past decade? And to what degree could new regulatory measures improve the management of capital and risk, especially for non-life underwriting ? The econometric methodology used in this study compares the two forms of regulation on the basis of panel data, using a partial equilibrium model with simultaneous equations for four Moroccan insurance companies over the period 2010-2018, using the generalized moments estimator. The results of the study indicate the importance of capital and risk in determining insurance solvency, while taking the effect of various exogenous variables incorporated in the determination of capital and risk into consideration. For the actual standard, the simultaneity relationship is significant between risk and capital, as the exogenous variables are generally all significant. For the SBR project, the simultaneity relationship is not verified for the capital equation, with the existence of a significantly positive impact of the capital on risk.