The determinants of profitability of insurance companies in Palestine

Abstract EN

This study aimed to examine the factors that affect the profitability of insurance companies in Palestine.

Unbalanced panel data was utilized from seven insurance companies operating in Palestine from 2006 to 2018 to estimate a linear model between determinants theoretically expected to affect performance and the profitability of insurance firms.

Findings revealed that size, growth and liquidity significantly positively affect the insurance firm’s profitability while motor claims, on the other hand, have a significant negative effect on the insurance company’s profitability.

Other factors including claims ratio and leverage ratio have no significant effect on profitability of insurance firms.

The main implications of these results are that Palestinian insurance companies should diversify their insurance portfolio away from motor insurance and keep higher liquidity levels to enhance profitability.

Further, some insurance companies are recommended to merge with other companies to increase size and to gain economies of scale.