Abstract

The article evaluates the applicability of the Dynamic Financial Analysis (DFA) method for assessing the financial performance of insurers by incorporating into the analysis various areas of risk affecting the financial position, with a particular focus on solvency. DFA is, along with Asset Liability Management (ALM) and Data Envelopment Analysis (DEA), one of the most widely used methods. Intelligent information systems are of great importance for the advancement of research in the assessment of the financial situation and solvency of insurance companies, since they allow the analysis of data over several periods, the identification of cause-and-effect relationships, and the evaluation of the impact of individual variables on the phenomenon under study. DFA makes it possible to carry out an integrated and holistic quantitative analysis of the relevant risk factors and determine the interrelationships between the determinants. The aim of the research is to present the methodological assumptions and to demonstrate, on the basis of a critical literature review, the usefulness of the Dynamic Financial Analysis (DFA) for the assessment of the financial condition and solvency of insurers. The article presents the methodology for proceeding with DFA, and critically evaluates the cases of application of the method that have been described in the literature. Its advantages and disadvantages were indicated. It was confirmed that the DFA method can be an important tool for making financial decisions of insurers. The disadvantages of the method are the ambiguous approach to the treatment methodology, as well as the need to generate a large number of scenarios for the insurance sector. Systematizing the approaches and regulating the application of the DFA method would spread its use by insurers.

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