Abstract:
The study uses the CARAMELS framework to find the impact of firm-specific
factors on the financial stability of life insurance companies in Bangladesh. This
research addresses a notable gap in the existing literature by focusing on the life
insurance sector, an essential but under-researched part of Bangladesh’s
financial soundness and financial stability. The model consists of capital
adequacy, asset quality, management soundness, liquidity, reinsurance &
actuarial issues, and earnings & profitability as independent variables, where
financial stability was measured through Return on Assets (ROA) as a dependent
variable. The secondary data was extracted from annual financial reports and
statements from 2014 to 2023, including 13 life insurance firms. Descriptive
statistics and regression models, including fixed and random effects tests, were
used to evaluate the performance of life insurance companies. The results show
that a significant impact exists from asset quality (AQ1), earnings & profitability
(EP1), earnings & profitability (EP3), liquidity(L) on return on assets. These
findings highlight the need for strategic asset management and operational
efficiency to enhance financial soundness in the life insurance industry. They
point out strong linkages that should control for effectiveness in strategic asset
management and prudent financial management for stability. The research
makes essential recommendations for regulatory authorities and insurance
companies, emphasising the importance of implementing sound financial
practices and policies to maintain stability and promote growth in the sector.
