SCENARIO PLANNING ROLE: CASE BALTIC NON-LIFE INSURANCE MARKET
Keywords:scenario planning methods, the Baltic non-life insurance market, Solvency II Directive, risk management
The purpose of the research is to investigate the role of the scenario planning methods in the future development of the Baltic non-life insurance market.
In order to achieve the stated objective and with the purpose to study the elements and functions of the scenario planning and critical stress testing, the authors use theoretical and methodological analysis of the scientific literature, analytical methods, expert and priority chart’s methods, comparative, statistical and modelling methods.
One of the major problems of the research was to find the correlation between the possible impact of the scenario planning methods and the process of managing the development of the insurance market. The stated problem was solved by using a special tool for scenario planning method that can be used by non-life insurance companies.
The authors have analysed the theoretical basis of scenario planning methods and prepared the financial analysis and scenario planning tool to evaluate the Baltic non-life insurance market’s development and to investigate its possible future outcomes with the main aim to demonstrate practical issues of scenario planning. In order to test scenarios discovered in the process of financial analysis using scenario planning tool, the authors have also applied critical scenario testing, which simulates possible future outcomes of an insurance company development.
The rate of the Baltic non-life insurance market’s development is considered to be rather high, hence it requires analysing, managing and evaluating its financial stability and solvency. The Baltic insurance market faces many challenges due to the requirements of the Solvency II framework, which will establish new rules of risk evaluation for improving the solvency of insurance companies and protecting the interests of policyholders. Since the implementation of the Solvency II regime requires a stable insurance market establishment, it is important to plan and analyse the possible scenarios of insurance market development. The assessment of the Baltic non-life insurance market can be performed through strategic organizational planning – scenario planning methods. Scenario planning methods help evaluating possible short – term future outcomes of stability and solvency of non-life insurance market’s participants’ using the means of simulations.