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.