Analysis of Insurance Market Development in Eastern European Countries Based on S-Curve

S-Curve is a versatile model for analyzing the relations between income and insurance penetration. The main assumption of the model is changing income elasticity. The S-Curve for insurance markets was firstly introduced in 2000. Further research contributed to theories enabling to determine the stage of insurance market development. Using the S-Curve world average penetration level as a reference we can assess the Benchmark Ratio of Insurance Penetration (BRIP) and trichotomy of insurance growth theorem which can be used to harness the advantages of S-Curve model. In the first part of the empirical research, the authors are comparing the Eastern Europe economies’ level of penetration with the world and regional references deriving from S-Curves. The world S-Curve parameters were assessed by W. Zheng, Y. Liu and Y. Deng, while the regional S-Curve parameters were estimated by the authors on the base of penetration and income levels of analyzed countries. The analysis shows the differences between Eastern Europe and the world and among the analyzed countries. This enables the authors to determine the stage of insurance development in life and non-life insurance markets, which in most of the cases is a sustained growth stage. In the second part of empirical research, BRIP was used by the authors to measure the pace and fluctuations of the analyzed insurance markets’ convergence. In the time series model of penetration level the author showed the seasonal variation caused by business and insurance cycle. The research conducted by the authors proves that countries in Eastern Europe have different pace of insurance convergence. Besides, the analysis shows that the countries can bring into play institutional growth in both life and non-life insurance market. Thus, in the time of the global financial crisis, the countries can increase the penetration level without any economic growth.