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Law and the Determinants of Property-Casualty Insurance

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Author Info
Neil Esho () (Australian Prudential Regulation Authority)
Ralf Zurbruegg (School of Commerce, University of Adelaide)
Anatoly Kirievsky (School of Banking and Finance, The University of New South Wales)
Damian Ward (University of Bradford Management Centre)

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Abstract

This paper examines the importance of legal rights and enforcement in influencing property-casualty insurance consumption. We extend the existing literature by examining the role both legal and political factors have on determining insurance density across countries. Also, measuresof risk aversion, loss probability and price, which overcome limitations of proxies used in the existing literature on insurance demand are analysed. Using a panel data set we apply the GMM dynamic system estimator, which relaxes the assumption of strict exogeneity of the regressors and produces unbiased and efficient estimates. The results show a strong positive relationship between the protection of property rights and insurance consumption, which is robust to various model specifications and estimation techniques. Moreover, the results show the purchase of nonlife insurance is significantly and positively related to risk aversion, loss probability and income, and negatively related to price.

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File URL: http://www.apra.gov.au/RePEc/RePEcDocs/Archive/working_papers/wp2001-02.pdf
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Publisher Info
Paper provided by Australian Prudential Regulation Authority in its series Working Papers with number wp2001-02.

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Date of creation: 01 Jun 2001
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Handle: RePEc:apr:aprewp:wp2001-02

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Related research
Keywords: Insurance; Property Rights; Law;

Other versions of this item:

Find related papers by JEL classification:
G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies
K11 - Law and Economics - - Basic Areas of Law - - - Property Law
K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General

Cited by:
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  1. Peter Haiss & Kjell Sümegi, 2008. "The relationship between insurance and economic growth in Europe: a theoretical and empirical analysis," Empirica, Springer, vol. 35(4), pages 405-431, September. [Downloadable!] (restricted)
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