Do Macroeconomic Factors Effects CARAMELS Financial Soundness Indicators? A Context of Non-Life Insurance Industry in Pakistan

Saghir Pervaiz Ghauri, Nadir Ali, Zahid Ali Chanar, Shahid Obaid


The research is carried out to find out the relationship of macroeconomic factors with the financial soundness indicators of CARAMELS framework for non-life insurance industry, by using a panel data set of 22 non-life insurance companies of Pakistan from the year 2007 to 2016. The study is established on a most applicable panel data technique (random effects model). The Hausman test proves that random effects model is suitable for the macroeconomic factors’ study. Based on the highest number of relationships among the variables, the results of random effects model indicate that macroeconomic factors (inflation and economic growth) have insignificant relation with the CARAMELS financial soundness indicators. According to the author’s best knowledge, it is the first study that identifies the relationship of macroeconomic factors with the CARAMELS financial soundness indicators, which will assist the scholars, managers and policy makers of the non-life insurance industry of Pakistan to consider the significant factors.


Macroeconomic factors; CARAMELS FSIs; financial soundness; non-life insurance industry

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