Determinants of Economic Performance of Non-Life Insurance Industry

Abstract

This study investigates the relationship between firm specific characteristics and macroeconomic variables on the profitability of non-life insurance industry in India. The empirical analysis investigates the impact of various firm characteristics such as, dimension, capital structure, investment policies, input costs and return on investment and several macroeconomic factors on the economic performance of the non-life insurance firms. Using a panel data for eighteen non-life firms over a period of seven years we applied a linear fixed and random effect model for empirical analysis. The study found low reinsurance, low input costs, lower inflation rate, and higher return on investment increase firm’s profitability. We also found lower liquidity ratio increases firm’s profitability. This implies firm managers need to assess the risk mix of their investment portfolio for achieving greater profitability. © 2016 IABE.