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Determinants of profitability of life and non-life insurance companies: evidence from Ecuador

Author

Listed:
  • Segundo Camino-Mogro
  • Natalia Bermúdez-Barrezueta

Abstract

Purpose - The purpose of this paper is is to identify the main determinants of insurance profitability on life and non-life segments to obtain which variables affect in each market of the Ecuadorian insurance sector. Design/methodology/approach - The authors use a large panel data set with financial information from 2001 to 2017 and estimate the determinants through a panel corrected standard errors regression. Findings - The authors found that net premiums, technical reserves, capital ratio and score efficiency are micro-determinants in the life insurance sector, whereas in the non-life sector, the micro-determinants include also claim level and liquidity ratio; moreover, the authors found that HHI is a determinant of profitability only in the life insurance. Among the macro determinants set, the authors found that the interest rate has also a significant impact both in the life and non-life insurance. Originality/value - The authors analyze a dollarized emerging country, which is the first time in this kind of studies. The authors also include the structure-conduct-performance and relative market power paradigm as well as the ES hypothesis, calculated through the data envelopment analysis, as determinants of insurance profitability. Finally, this is the first research to examine the determinants of profitability in Latin American and Caribbean insurers.

Suggested Citation

  • Segundo Camino-Mogro & Natalia Bermúdez-Barrezueta, 2019. "Determinants of profitability of life and non-life insurance companies: evidence from Ecuador," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 14(5), pages 831-872, August.
    • Handle: RePEc:eme:ijoemp:ijoem-07-2018-0371
    DOI: 10.1108/IJOEM-07-2018-0371
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    Citations

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    Cited by:

    1. Bilel Jarraya & Hatem Afi & Anis Omri, 2023. "Analyzing the Profitability and Efficiency in European Non-Life Insurance Industry," Methodology and Computing in Applied Probability, Springer, vol. 25(2), pages 1-25, June.
    2. Maheswaran Srinivasan & Subrata Mitra, 2024. "Determinants of Life Insurance Consumption in OECD Countries Using FMOLS and DOLS Techniques," Risks, MDPI, vol. 12(2), pages 1-17, February.
    3. Alhassan, Abdul Latif, 2023. "Financial Health of Medical Schemes in South Africa," Finance Research Letters, Elsevier, vol. 51(C).
    4. Burmaa Galaa & Enkhamgalan Byambajav & Kai-yin Woo & Amarbayasgalan Myagmar-Ochir & Saruultuya Tsendsuren, 2024. "Long-run relationship between insurance premiums and driving factors in Mongolia," Advances in Decision Sciences, Asia University, Taiwan, vol. 28(2), pages 116-136, June.

    More about this item

    Keywords

    DEA; Emerging country; Concentration analysis; Insurance profitability; G21; G22; M41;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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