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INCREASING THE EFFICIENCY OF ALLOCATION OF FINANCIAL
RESOURCES OF INSURANCE COMPANIES
Mavrulova Nilufar Abdukhalilovna
Associate Professor of the Tashkent State University of Economics, Doctor of
Economic Sciences
email: mavrulovanilufar7@gmail.com
Abstract .
The article describes the emergence of insurance companies as a
major source of investment in the economy. The analysis of the placement of
financial resources by insurers and its effectiveness is carried out, and the issues
of further expansion and optimization of the investment portfolio are studied. The
expected results in the insurance sector through the introduction of these directions
are also described.
Keywords:
insurance, investment activities, financial resources, investment
objects,
investment portfolio, insurance premium, authorized capital, reserve.
Introduction.
Insurance companies are recognized as the largest financial
resource-collecting sector in the world, which makes them a major source of
investment
.
Insurance companies , along with other financial institutions (banks,
stock exchanges, investment funds , pension funds , etc.), are an integral part of
the country's financial market and constitute an important link in the state financial
system [1]. The accumulation and distribution of a certain level of cash flows in
insurance companies also makes them major investors. The fact that insurance
companies are officially allowed to engage in other types of activities in addition
to their main activities creates conditions for their free participation in the stock
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markets .
Insurance is considered the most effective means of eliminating the negative
consequences of unforeseen events that occur to the population and various
property entities , and contributes to reducing the cost burden of the state budget.
In recent years , a number of reforms have been implemented to improve the sector
, in particular, to expand the insurance market, ensure a wide range of insurance
services, and increase the financial potential of insurers [1] . In particular, our
President Shavkat Mirziyoyev paid serious attention to the sector and gave specific
tasks and instructions for its rapid development . 20 23 years 1 In March , the
Resolution No. PQ-108 " On comprehensive measures for the further development
of the insurance services market" was adopted, in which the tasks of regularly
increasing the amount of the authorized capital of insurance companies and thus
expanding their scope of activity and ensuring their financial strength were
determined, including specific instructions on the implementation of financing of
sectors of the economy in need of funds by increasing the volume of investments [
2 ] .
The financial potential of insurance companies is formed on the basis of their
own funds and the source of attracted funds . In this sense, it is worth mentioning
that the financial resources of insurance companies determine their financial
potential. The amount of authorized capital of insurers is formed during their state
registration. The formed charter capital was considered the main financial basis for
insurance companies at the initial stage of their activity. The authorized capital of
insurers is formed from various sources, the initial minimum amount is formed by
the founding legal entities or individuals, and subsequently it is replenished during
the course of its activity from the income received by the organization in various
directions, net profit, proceeds from the sale of shares and other sources, but its
formation from borrowed funds and borrowed funds is not allowed. The main
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source of formation of the financial potential and resources of insurance companies
is its income and expenses.
Literature analysis ( Obzor literatur / Literature review) . Foreign
scientists Makeykina S.M. and Lyoshin S.S. " Investitionnaya deyatelnost
strakovykh kompanii kak faktor povyshenia ix finansovoy ustoychivosti v
usloviyax ekonomicheskoy retsessii " of s . In the research work of Uzbek
economist Kenjaev
I.G. on the topic “Ways to increase the efficiency of placing
financial resources of insurance organizations”, priority areas for expanding the
investment opportunities of insurers were put forward .
Research methods ( Methods of research / Methodology ) .
In the process
of conducting the research, the methods of systematic analysis and approach,
logical and structural analysis, grouping and generalization, expert assessment and
forecasting, and mutual and comparative comparison were used.
Analysis and results ( Analysis and results / Analysis and results ) .
The movement of financial resources of the organization in insurance
activities has a specific character. All policyholders participate equally in the
formation of the insurance fund (of course, depending on the amount of the insured
object and the probability of occurrence of risks affecting it), but it is used only by
policyholders whose objects have suffered damage, insurance premiums paid under
contracts where the insured event did not occur are not refunded. In both areas of
insurance, the movement of financial resources is based on income and expenses:
the main source of income of insurers is insurance premiums, while the largest
expense is the share of insurance compensation paid to damaged insured objects.
The difference between these two indicators, that is, the difference that arises after
the realization of all income and expenses of the insurance company, represents
financial resources in the form of temporarily free cash and is allowed to be directed
under the conditions of diversification, in accordance with the relevant articles of
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the regulatory documents regulating the industry. The main goal of insurers in
investing their financial resources in investment objects is to achieve financial
efficiency through the correct and rational use of their activities. To do this, the
insurance company must ensure the stability of its investment portfolio, thereby
increasing its stability and competitiveness. It should be noted that in international
practice, insurance companies often compensate their financial obligations to
policyholders not from income from insurance activities, but from income from
additional investment activities. In developed countries, the loss index of insurance
premiums in some cases is 90-93 percent, in such cases, the insurance reserves
formed at the expense of insurance premiums in the organization are not enough to
fully cover obligations, and obligations are fulfilled precisely from income from
investment activities.
To fully utilize the existing investment opportunities within the country, it is
important to create a favorable investment climate in the country. One of the main
conditions for creating a favorable investment climate is to ensure the efficiency of
financial resources allocated for investment. Attracting the necessary level of
investments to the economy and ensuring their efficiency leads to increased
investment activity of economic entities and ensuring sustainable economic growth
[ 4 ] .
The development of investment activities of insurance companies is of great
importance for the successful implementation of investment activities in the
country, increasing their volume and ensuring their efficiency. Because in
investment activities, insurance companies perform two tasks: insuring external
and internal investments from various risks and acting as investors. The essence of
the activities of insurance companies is to cover losses associated with the
occurrence of various risks of this nature and society, and to collect insurance
premiums from insured legal entities and individuals in exchange for this service,
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and to receive additional income by temporarily placing their funds in various
sectors with the condition of returning the accumulated and attracted funds, and to
receive a certain investment income in the future. The above-mentioned activities
of an insurance company in various sectors are considered investment activities in
practice. Investment activities form the basis of the activities of an insurance
company in placing financial resources.
The investment opportunities of the organization, as is known, depend on the
results of the main activity, since during the insurance contract, insurance
premiums are stored in insurance funds, and after the expiration of the contract, the
funds remaining in the fund create an investment environment, so the investment
activities of insurance companies can be assessed by studying the analysis of the
development trends of the activities of insurance companies in the country. It
should be noted that insurers achieve high efficiency through the correct and
rational allocation of financial resources, in particular, this practice is actively
supported in Uzbekistan today. Most participants in the financial market consider
the attraction of free cash resources by insurers to be beneficial for both parties and
allows insurers to form an insurance portfolio.
Table 1
Distribution of insurers' financial resources among investment objects
[ 2 ]
Indicators
30.06.2023
30.06.2024
Change,
in
percent
million
soums
as a
percentage
of the total
million
soums
as a
percentage
of the total
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Total
investments,
including:
5,189,971
100%
6 111 360
100%
+17.8%
Deposits
3 292 385
63.4%
4 052 224
66.3%
+23.1%
Securities
1,267,653
24.4%
1,288,737
21.1%
+1.7%
Loans
51 140
1.0%
76,028
1.2%
+48.7%
Real estate
425,570
8.2%
598 136
9.8%
+40.5%
Participation in
the authorized
fund of the
organization
119,323
2.3%
88 210
1.5%
-26.1%
Others
33,900
0.7%
8,025
0.1%
-76.3%
Insurance companies also increase their financial stability by directing their
resources to finance investment objects. According to the experience of countries
with a stable development of the insurance system, the income of insurance
companies from investment activities is higher than the income from the main
activity, which means that they have a high loss ratio of insurance premiums.
According to the table, in the reporting period, as in previous years, the share of
bank deposits and securities in the total volume of directed financial resources was
significant and amounted to 88 percent in total.
In general, the financial potential of the insurance market has grown by an
average of 16 percent, which has increased investment opportunities. In
Uzbekistan, insurance companies are the main partners of the country's commercial
banks in terms of providing them with financial resources. This can be explained
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by the fact that some organizations operating in the field of general insurance were
founded by commercial banks, and these banks insure the risks arising in their
activities, including financial risks such as non-repayment of loans, technical risks
associated with property damage, and health risks arising from the work of
employees, in partner insurance organizations in compliance with the requirements
of a market economy. In turn, these insurance companies provide free funds to
partner commercial banks as a resource and receive interest income for their use.
According to the table, 66.3 percent of investments made by insurance companies
are placed in deposits, which is the simplest form of the movement of financial
resources. The financial resources of global insurers move through stock
exchanges. The stock market provides an opportunity to transform the free funds
of legal entities and individuals into all sectors of the economy. Improving the
activities of insurers in the stock market is an important factor in ensuring reliable
allocation of resources , their close connection with real production, and attracting
additional resources.
The stock and insurance markets, which are important components of the
financial services market, stimulate the sustainable development of the economy
by supporting sectors in need of capital . The development of the stock market is
seen as the most important factor affecting the development of the entire economy,
since it is connected with a wide range of economic activities. The insurance market
is also one of the main sectors affecting its activities and development. Today, one
of the priority tasks facing the country is to increase the role of the stock and
insurance markets in the process of radical economic reforms and improve their
interaction [5] . Insurance companies act in the stock market, firstly, as issuers of
securities in order to form and increase their authorized capital and meet their needs
for working capital; secondly, as investors who, depending on the type of their
activity, i.e. the presence of temporarily attracted free funds, direct them to
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securities; thirdly, as investment intermediaries in the stock market; fourth, appears
as an insurer of risks in the stock market.
The National Agency for Promising Projects of the Republic of Uzbekistan
plays an important role in the regulation of insurance activities in the country's
insurance market, as well as its development, penetration of the population, and
increasing the index of insurance services, and to achieve these goals, it plays an
important role in conducting events aimed at demonstrating the essence of the
industry in the media, thereby raising the insurance culture. Also, in order to
increase the transparency of the insurance market, ensure the openness of
information on the activities of insurers, thereby increasing the interest of insured
and potential insured persons and expanding their audience, the results of the
activities of insurance companies for each reporting period are published in the
media . In general, today there is a high interest of local insurers in investing in
banks, which can be explained by the active participation of commercial banks in
the authorized capital of insurers. Most insurers also believe that channeling into
bank deposits is reliable in ensuring the liquidity of investment funds.
Each insurer must develop a comprehensive strategic program at the
beginning of the financial year, fully reflecting the formation and use of its financial
resources. This program should not be just a document, but a mechanism that
companies will fully implement throughout the financial year and serve to achieve
the desired efficiency. The program should study the structure of the insurance
company's investment portfolio, strictly determine their share in the total insurance
portfolio, and in turn, the insurance company should organize its investment
activities without departing from the program, thereby systematically managing the
organization's financial resources.
Conclusion ( Zaklyuchenie / Conclusion).
Placement of financial resources
of insurance companies and in order to achieve their effectiveness, the following
conclusions were reached and some proposals were developed:
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1. In order to effectively organize the insurance sector, expand its scope,
increase the level of capitalization, solvency and financial strength of insurers, and
encourage their participation in investment processes, the government is creating a
number of incentives and reliefs. Today, not all of the 35 insurance companies
operating in the insurance market are ready to direct their financial resources to
investment. Therefore, the volume of insurance premiums collected by them does
not determine the investment opportunity, but the lower the level of loss of
insurance premiums, the higher the investment opportunity.
2. Between the time of receipt of insurance premiums and the period of
payment of insurance benefits, temporary free resources are created and they are
converted into investment capital. For this reason, in industrialized countries , the
insurance market is recognized as a factor that has a stabilizing effect on the
economy.
3. The formation of the minimum authorized capital of insurance companies
is under control, and it is advisable to increase these amounts as the economy
develops. The amount of authorized capital expands the scope of services of the
insurer, which in turn ensures the creation of a large amount of financial resources
and their effective movement. Insurance companies, through their financial
resources, make a significant contribution to ensuring sustainable growth of the
economy, while becoming a sector providing beneficial services to society.
REFERENCES ( S pisok ispolzovannoy literatury / References):
1. Mavrulova N.A. Increasing the investment opportunities of insurance
organizations. // Scientific journal
“
Finance
”
.
–
Tashkent, 2021. Issue 5.
2. The President of the Republic of Uzbekistan 20 23 years 1 in March
Resolution No. PQ - 108 " On comprehensive measures for further development of
the insurance services market ".
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3. Mavrulova N.A. Increasing the role of reinsurance in ensuring the
financial stability of insurance companies. Doctor of Philosophy in Economics.
Dissertation for the degree of PhD. Tashkent, 2019.
4. Kenzhaev I.G. Ways to increase the efficiency of placing financial
resources of insurance organizations . Doctor of Philosophy in Economics.
Abstract of the dissertation for the degree of PhD. Tashkent, 2019.
5. Abdullayeva N.A. Improving the activities of insurance companies in the
stock market . Doctor of Philosophy in Economics. Abstract of the dissertation for
the degree of PhD. Tashkent, 2022.
6.
information from the official website of the
National Agency for Promising Projects of the Republic of Uzbekistan .
