Solvency and Sustainability: Evidence from the Insurance Industry

Conducting a financially sustainable business may collide with the constraints imposed by the necessity of the alignment with the Sustainable Development Goals. On the one hand, regulators demand companies to satisfy solvency requirements to operate in the insurance activity. On the other hand, the global transition to a more sustainable economy pushes companies to operate a severe business transformation. We investigate the relationship between the Solvency Ratio and Environmental, Social, and Governance score (ESG) score using an individual fixed effect regression model, including insurance-specific control variables. Our results indicate that an insurance company’s ESG commitment increases its solvency level.