Abstract
This paper examines the solvency determinants, including economic and firm-specific factors, in the United Kingdom life insurance market. Using panel data for 1986–1999, it is found that solvency was positively related to bonds-to-total assets, equities-to-total assets, and level of new business, but negatively related to unexpected inflation, market competition, assets held to cover linked liabilities-to-total assets, life and general annuity reserves-to-total reserves, pension reserves-to-total reserves, permanent health reserves-to-total reserves, other reserves-to-total reserves, firm size, and insurance leverage. Based on panel data for the three subperiods, 1986–1990, 1990–1994, and 1994–1999, it was further found that solvency determinants changed from one epoch to another.