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What Drives the Development of the Insurance Sector? An Empirical Analysis Based on a Panel of Developed and Developing Countries

Author

Listed:
  • Feyen, Erik

    () (World Bank)

  • Lester, Rodney

    () (World Bank)

  • Rocha, Roberto

    () (World Bank)

Abstract

The insurance sector can play a critical role in financial and economic development. By reducing uncertainty and the impact of large losses the sector can encourage new investments, innovation, and competition. As financial intermediaries with long investment horizons, insurance companies can contribute to the provision of longterm instruments to finance corporate investment and housing. There is evidence of a causal relationship between insurance sector development and economic growth. However, there have been few studies examining the factors that drive the development of the insurance industry. This paper contributes to the literature by examining the determinants of insurance premiums (both life and non-life premiums) and total assets for a panel of about 90 countries during the period 2000-08. The results show that life sector premiums are driven by per capita income, population size and density, demographic structures, income distribution, the size of the public pension system, state ownership of insurance companies, the availability of private credit, and religion. The non-life sector is affected by these and other variables. While some of these drivers are structural, the results also show that the development of the insurance sector can be influenced by a number of policy variables.

Suggested Citation

  • Feyen, Erik & Lester, Rodney & Rocha, Roberto, 2013. "What Drives the Development of the Insurance Sector? An Empirical Analysis Based on a Panel of Developed and Developing Countries," Journal of Financial Perspectives, EY Global FS Institute, vol. 1(1), pages 117-139.
  • Handle: RePEc:ris:jofipe:0006
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    Citations

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    Cited by:

    1. Giovanni Millo, 2016. "The Income Elasticity of Nonlife Insurance: A Reassessment," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 83(2), pages 335-362, June.
    2. J. Francois Outreville, 2014. "Risk Aversion, Risk Behavior, and Demand for Insurance: A Survey," Journal of Insurance Issues, Western Risk and Insurance Association, vol. 37(2), pages 158-186.
    3. J. Fran├žois Outreville, 2015. "The Relationship Between Relative Risk Aversion And The Level Of Education: A Survey And Implications For The Demand For Life Insurance," Journal of Economic Surveys, Wiley Blackwell, vol. 29(1), pages 97-111, February.

    More about this item

    Keywords

    Life and non-life; insurance development determinants; econometric analysis;

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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