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Insurance market activity, both as a financial intermediary and a provider of risk transfer and indemnification, may contribute to economic growth by allowing different risks to be managed more efficiently and by mobilizing domestic savings. During the past decade, there has been faster growth in insurance market activity, particularly in emerging markets given the process of liberalization and financial integration, which raises questions about its impact on economic growth. The author tests whether there is a causal relationship between insurance market activity (life and nonlife insurance) and economic growth. Using the generalized method of moments for dynamic models of panel data for 56 countries and for the 1976-2004 period, he finds robust evidence of a causal relationship between insurance market activity and economic growth. Both life and nonlife insurance have a positive and significant causal effect on economic growth. High-income countries drive the results in the case of life insurance. On the other hand, both high-income and developing countries drive the results in the case of nonlife insurance.
Insurance market activity, both as a financial intermediary and a provider of risk transfer and indemnification, may contribute to economic growth by allowing different risks to be managed more efficiently and by mobilizing domestic savings. During the past decade, there has been faster growth in insurance market activity, particularly in emerging markets given the process of liberalization and financial integration, which raises questions about its impact on economic growth. The author tests whether there is a causal relationship between insurance market activity (life and nonlife insurance) and economic growth. Using the generalized method of moments for dynamic models of panel data for 56 countries and for the 1976-2004 period, he finds robust evidence of a causal relationship between insurance market activity and economic growth. Both life and nonlife insurance have a positive and significant causal effect on economic growth. High-income countries drive the results in the case of life insurance. On the other hand, both high-income and developing countries drive the results in the case of nonlife insurance.
Insurance as a component of financial system, makes economic activities possible, as well as contributes to the growth of the economy's size, employment, managed assets etc. The current paper examines the relationship between the development of insurance sector and economic growth as well as factors contributing to the growth of insurance sector in India. It studies life insurance density and penetration as well as, non-life insurance density and penetration and links them to GDP growth. Later, demographic factors such as age dependency ratio, urban population growth, life expectancy and adult literate population are checked for explaining insurance density and penetration. Using Granger Causality, cointegration within VECM framework, the study finds long run causality between insurance development and economic growth. Further using ARDL bounds approach, a long run causality between life expectancy and insurance development was found. The study concludes by pointing the role of risk aversion due to life uncertainty in insurance development and importance of insurance development in economic growth, with scope of further research on similar lines by considering the role of insurance and its broader investigations.
The paper investigates empirically the determinants of economic growth for a large sample of sub-Saharan African countries during 1981-92. The results indicate that (i) an increase in private investment has a relatively large positive impact on per capita growth; (ii) growth is stimulated by public policies that lower the budget deficit in relation to GDP (without reducing government investment), reduce the rate of inflation, maintain external competitiveness, promote structural reforms, encourage human capital development, and slow population growth; and (iii) convergence of per capita income occurs after controlling for human capital development and public policies.
This paper explores insurance as a source of financial system vulnerability. It provides a brief overview of the insurance industry and reviews the risks it faces, as well as several recent failures of insurance companies that had systemic implications. Assimilation of banking-type activities by life insurers appears to be the key systemic vulnerability. Building on this experience and the experience gained under the FSAP, the paper proposes key indicators that should be compiled and used for surveillance of financial soundness of insurance companies and the insurance sector as a whole.
Insurance can play a significant role in helping countries achieve the UN SDGs in terms of economic growth, social inclusion, and environmental protection. This can be achieved through the risk transfer mechanisms of households, businesses, and the public sector. The paper has a twofold purpose. First, to help regulators and insurance policymakers in emerging markets make the case for supporting insurance market development through drawing more attention to contribution the sector can make to achieving national SDGs. Secondly, to help investors, donors, international organizations focus their insurance market development efforts in countries where the sector has the maximum potential to contribute to the achievement of SDGs. This paper considers the role of insurance companies as underwriters facilitating risk transfer, as investors and asset managers and as corporate citizens and employers. The underwriting dimension is currently the most significant but all three have a role to play in supporting the SDGs. The paper also discusses how insurance can contribute more to these goals, including through targeted interventions in countries where conditions for right for insurance market development and SGD targets will need greater support to be met. Countries were screened for performance vs. the selected SDGs, by the potential for insurance sector development, as well as for minimum necessary enabling conditions for market growth. The paper concludes that the role of insurance has been somewhat overlooked in the context of the SDGs and that this is largely because the current indicators largely do not capture metrics relating to insurance. To be able to better assess the role of insurance and motivate the industry to contribute more to the SDGs, more consistent and disaggregated data collection on the following is recommended: lines of business; invested assets; gender disaggregated data. The UN, governments and the insurance industry are also encouraged to put greater emphasis on developing the sector as a means to achieving the SDGs.
Economic and social progress requires a diverse ecosystem of firms that play complementary roles. Making It Big: Why Developing Countries Need More Large Firms constitutes one of the most up-to-date assessments of how large firms are created in low- and middle-income countries and their role in development. It argues that large firms advance a range of development objectives in ways that other firms do not: large firms are more likely to innovate, export, and offer training and are more likely to adopt international standards of quality, among other contributions. Their particularities are closely associated with productivity advantages and translate into improved outcomes not only for their owners but also for their workers and for smaller enterprises in their value chains. The challenge for economic development, however, is that production does not reach economic scale in low- and middle-income countries. Why are large firms scarcer in developing countries? Drawing on a rare set of data from public and private sources, as well as proprietary data from the International Finance Corporation and case studies, this book shows that large firms are often born large—or with the attributes of largeness. In other words, what is distinct about them is often in place from day one of their operations. To fill the “missing top†? of the firm-size distribution with additional large firms, governments should support the creation of such firms by opening markets to greater competition. In low-income countries, this objective can be achieved through simple policy reorientation, such as breaking oligopolies, removing unnecessary restrictions to international trade and investment, and establishing strong rules to prevent the abuse of market power. Governments should also strive to ensure that private actors have the skills, technology, intelligence, infrastructure, and finance they need to create large ventures. Additionally, they should actively work to spread the benefits from production at scale across the largest possible number of market participants. This book seeks to bring frontier thinking and evidence on the role and origins of large firms to a wide range of readers, including academics, development practitioners and policy makers.
This thesis evaluates the existing and potential contribution of good regulation to insurance market development. I empirically analyse whether regulatory quality promotes insurance activity on the global scale, based on a unique dataset of 214 countries over a twelve year time span from 2000 - 2011. The analyses include both the distinction between the life and non-life line of business and the different economic development stages of the respective countries. My empirical findings support that regulation generally affects the efficiency of the insurance business. In particular density, defined as the ratio of total insurance premiums to total population, seems to depend heavily on the regulatory quality. Looking at the sub-samples, good regulation contributes significantly to the life insurance sector but does not seem to be a key driver for the non-life business. Similarly, I identify that the regulatory impact can be affirmed exclusively for developed countries whereas the results for the developing countries indicate that the institutional environment (political stability and fiscal freedom) is of greater relevance. The results enhance the understanding that there is a context-specific insurance-regulation nexus. Thus, one potential implication for regulatory policy is that good regulation preferentially has to enforce the conduct of business in the equivalent environment. I therefore recommend the principle of regulatory adequacy for the quantitative aspects of solvency risk as well as for the qualitative aspects of market discipline under consideration of both, the particular economy and the specific line of business. Focusing on behavioural aspects will be a key determinant to achieve these customised solutions.