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Competition, efficiency and soundness in European life insurance markets

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  • Cummins, J. David
  • Rubio-Misas, María
  • Vencappa, Dev

Abstract

This paper provides cross-country evidence on the association between soundness and competition in the life insurance industry, where competition is measured by the Boone indicator. We analyse 10 European Union (EU) life insurance markets over the post-deregulation period 1999–2011. The results indicate that competition increases the soundness of the EU life insurance markets. Since the Boone indicator measures competition based on the reallocation of profits from inefficient insurers to efficient ones, our results suggest that efficiency is the mechanism through which competition contributes to insurer solvency. The soundness-enhancing effect of competition is greater for weak insurers than for healthy ones.

Suggested Citation

  • Cummins, J. David & Rubio-Misas, María & Vencappa, Dev, 2017. "Competition, efficiency and soundness in European life insurance markets," Journal of Financial Stability, Elsevier, vol. 28(C), pages 66-78.
    • Handle: RePEc:eee:finsta:v:28:y:2017:i:c:p:66-78
    DOI: 10.1016/j.jfs.2016.11.007
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    More about this item

    Keywords

    Competition; Soundness; Boone indicator; European life insurers; Financial crisis;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G01 - Financial Economics - - General - - - Financial Crises

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