EVALUATION OF FINANCIAL STABILITY OF THE INSURANCE SECTOR IN MONGOLIA

Introduction: Insurance activity is defined as the obligation of an insurer to compensate for losses or provide an agreed indemnity in the event of an insured incident, as stipulated by the Insurance Law of Mongolia. Recent amendments to this law and the Law on Public and Local Government Property Procurement in 2022 expanded insurers’ roles, allowing them to issue guarantees and sureties beyond contracting entities. The financial stability of insurance companies is a critical factor in ensuring their ability to meet financial obligations and maintain market confidence. In Mongolia, the insurance sector remains relatively small, necessitating a comprehensive evaluation of its financial health to support industry growth and stability. Methods: This study utilizes the «Care rating» method, widely applied internationally for assessing the financial stability of insurance companies, alongside the Kennu ratio. The analysis covers financial reports and publicly available data from commercial insurance companies between 2019 and 2023. Results: The findings indicate that while the loss ratio has remained stable, high operational expenses continue to challenge the sector’s financial sustainability. Liquidity ratios demonstrate insurers’ ability to meet short-term obligations, but solvency adequacy varies, highlighting inconsistencies in risk management strategies. Discussion: The results underscore the necessity of enhancing financial stability through improved risk management and more efficient equity utilization. Given the limited contribution of the Mongolian insurance sector to GDP, strengthening financial resilience is imperative for its long-term development and competitiveness in the broader financial market. Insurance activity is defined as the activity where the insurer undertakes the obligation to compensate for the losses incurred or the agreed insurance indemnity in the event of an insured incident under the terms of the insurance contract. This is stipulated in the Insurance Law of Mongolia. Additionally, amendments were introduced to the Insurance Law and the Law on Public and Local Government Property Procurement in 2022, allowing insurers to provide guarantees and sureties to parties other than the contracting entities. In conducting insurance activities, the ability to fulfill financial obligations is crucial, and there are various methods to assess this. The research is based on the «Care rating» method commonly used internationally to assess the financial stability of insurance companies, as well as the Kennu ratio, and analyzes the financial reports and other public data of commercial insurance companies from 2019 to 2023.