Insurance market dynamics: Between global developments and local contingencies

Insurance markets have changed radically and deeply in the past twenty years. Deregulation, globalization of insurance institutions, intensified competition, electronic commerce, bancassurance, and the emergence of new risks are among the challenges faced by insurance markets. Although important global trends are reshaping insurance markets, the emphasis on globalization overlooks the local diversity of insurance markets worldwide. This article reviews the global developments and local factors affecting insurance markets and evaluates the advantages and disadvantages of globalization. Among the important global trends are the increasing sophistication of insurance products, the globalization of risk diversification through reinsurance, the emergence of mega-financial intermediaries, and the growing importance of supranational agencies such as the World Bank and the World Trade Organization. On the other hand, there remains significant heterogeneity among countries and regions that has a profound impact on insurance markets. Among the important local differences are political, legal, and cultural components as well as differences in financial markets, taxation, regulatory systems, insurer investment strategies, and insurance distribution systems.