Analysis of Insurance Market Development Based on the S-Curve - The Case of the Western Balkan Countries

One of the most commonly used measures of insurance market development is insurance penetration rate, as ratio of gross written premiums to the country’s gross domestic product (GDP). Its important shortcoming is that it neglects the level of economic development of the country. The S-curve is a theoretical model describing the relationship between insurance penetration rate and GDP per capita and allowing a comparison of insurance development between countries at different stages of economic development. The paper analyzes the development level of insurance markets in the Western Balkan countries, in relation to the world average using the S-curve. The world S-curve is derived by estimating a non-linear regression model using data on insurance penetration and GDP per capita for 90 countries from 2006 to 2020. The insurance markets of the Western Balkan countries are below the world S-curve. In order to quantify insurance development gap, we calculated Benchmark Ratio of Insurance Penetration (BRIP) for each country using the world S-curve penetration level as a reference. The results show that the insurance development gap is growing in all countries of the region, except in Albania, where it is the largest. Insurance industry policy for the Western Balkans should focus on improving institutional factors in order to enable sustainable insurance growth in the long run.