Cuadernos de Economía

ISSN : 0210-0266

The Role of Technical Reserves and Investments in Income Smoothing Operations: Empirical Evidence in Insurance Companies Operating in the Gulf Cooperation Council Countries

  • Alaulddin Abdul Wahab Hassoon Al-Sabti , Assistant Professor, Accounting Department, Shatt Al-Arab University College, Basrah, Iraq.
  • Suhail Abdullah Al-Tamimi , Professor, Department of Accounting, College of Administration & Economics, University of Basrah, Basrah, Iraq.
  • Mohanad Hadi Yasir , Assistant Lecturer, Accounting Department, Shatt Al-Arab University College, Basrah, Iraq.


Income Smoothing, Technical Reserves, Investment Risks, Investment Performance, Reinsurance, Financial Strength, International Financial Reporting Standards..


The process of withholding potential losses in insurance is a mechanism that facilitates income smoothing. It is a prominent subject in accounting research, often discussed as a potential catalyst for manipulation. However, empirical evidence from accounting studies does not support this hypothesis. This study investigates the role of technical reserves and investments in the income smoothing process. It assesses the accuracy of reserves in various categories (unearned premium reserve, investment, financial strength, and reinsurance coverage) using a sample of 25 companies operating in Gulf Cooperation Council countries from 2014 to 2022. The study explores the relationship between constructs using the Method of Moments Quantile Regression (MMQR) approach. The findings revealed a significant association between income smoothing strategies and both the unearned premium reserve and investment revenue levels. The study revealed significant correlations between reserve estimations, reinsurance, financial health, and income smoothing procedures. In order to improve income smoothing procedures for insurance companies, regulators should prioritize reserve estimations, reinsurance, and financial health, according to the study.