THE CAPITAL STRUCTURE: AN ANALYSE ON INSURANCE COMPANIES

Abstract

The capital structure of firms depends on their various activities and on the economy where they are located. These firms can finance capital with own resources (equity) or borrowing money in market (passive) in the short or long term. However, some of these activities do not depend on his wishes because there taxes and periods are determined by the government or donors. The capital structure is also influenced by the main activities of the companies, their investments and changes in sales. It is important to say that the operations in an insurance run with a lower risk than in other industrial or financial company, because it always gets the prize before any payment resulting from a claim, ie, its cash flow is always positive. Moreover, large part of its liabilities is made up of technical reserves, which are reserves that the insurer made to cover any disbursement of compensation. Then it can be assumed that the share of debt that required the same need is low or absent, compared with the rest of the market. This article aims to analyze the capital structure of companies insurers, as well as detailing whether there are peculiarities in comparison with other business enterprises. For this, it was carried out a literature review about general concepts of capital structure and insurance market, then it was performed a survey containing conclusions on how such a phenomenon presents the insurers. The main evidence of this study was to characterized the insurers liability that is mainly constituted by technical provisions. Such provisions are derived from the primary operation of the companies because it is a reserve for future payments then the companies should make in case of probable occurrence of accidents.