This paper focuses on financial soundness indicators (FSIS) and suggests two sets of such indicators for...

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This paper focuses on financial soundness indicators (FSIS) and suggests two sets of such indicators for insurance companies. FSIs are one of the major tools for surveillance and early supervisory intervention, and can be broadly defined as indicators compiled to monitor the condition of financial institutions and markets by measuring their financial strength and vulnerabilities.2 FSIs identify trends and provide information so that the experience of different companies can be compared and outliers identified. A major effort-within the IMF and in other institutions-has recently been aimed at development of such indicators, as part of a broader effort to strengthen the surveillance of financial systems and enhance crisis prevention after the financial crises in the late 1990s; see, for instance, IMF (2000 and 2002a). Previous work has concentrated on the banking system, and the nonbank indicators have been left for further research. This paper focuses on financial soundness indicators (FSIS) and suggests two sets of such indicators for insurance companies. FSIs are one of the major tools for surveillance and early supervisory intervention, and can be broadly defined as indicators compiled to monitor the condition of financial institutions and markets by measuring their financial strength and vulnerabilities.2 FSIs identify trends and provide information so that the experience of different companies can be compared and outliers identified. A major effort-within the IMF and in other institutions-has recently been aimed at development of such indicators, as part of a broader effort to strengthen the surveillance of financial systems and enhance crisis prevention after the financial crises in the late 1990s; see, for instance, IMF (2000 and 2002a). Previous work has concentrated on the banking system, and the nonbank indicators have been left for further research.