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On the Determinants of Life and Non-Life Insurance Premiums

Author

Listed:
  • Martin Hodula
  • Jan Janku
  • Martin Casta
  • Adam Kucera

Abstract

This paper tests potential determinants of the development of the insurance sector. Using a rich dataset for 24 European countries spanning two decades, we identify a set of macro-financial factors that are the most robust predictors of growth of gross premiums in the life and non-life insurance sectors. We show that both life and non-life premiums co-move with the business cycle and are positively related to higher savings and a more developed financial system. In addition, we provide new evidence on the role of market concentration and price effects. We find that market concentration matters only for life insurance, whereas the price channel is significant only for non-life insurance. From a policy perspective, our empirical estimates can be used to refine the existing macroprudential stress tests of the insurance sector.

Suggested Citation

  • Martin Hodula & Jan Janku & Martin Casta & Adam Kucera, 2020. "On the Determinants of Life and Non-Life Insurance Premiums," Working Papers 2020/8, Czech National Bank.
    • Handle: RePEc:cnb:wpaper:2020/8
    as

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    File URL: https://www.cnb.cz/export/sites/cnb/en/economic-research/.galleries/research_publications/cnb_wp/cnbwp_2020_08.pdf
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    References listed on IDEAS

    as
    1. J.A. Bikker & J. Gorter, 2008. "Performance of the Dutch non-life insurance industry: competition, efficiency and focus," Working Papers 08-01, Utrecht School of Economics.
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    3. Casper Christophersen & Petr Jakubik, 2014. "Insurance and the Macroeconomic Environment," EIOPA Financial Stability Report - Thematic Articles 1, EIOPA, Risks and Financial Stability Department.
    4. Babbel, David F, 1985. "The Price Elasticity of Demand for Whole Life Insurance," Journal of Finance, American Finance Association, vol. 40(1), pages 225-239, March.
    5. Lee, Chien-Chiang & Lee, Chi-Chuan & Chiu, Yi-Bin, 2013. "The link between life insurance activities and economic growth: Some new evidence," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 405-427.
    6. Benjamin Lorent, 2008. "Risks and regulation of insurance companies: is Solvency II the right answer?," Working Papers CEB 08-007, ULB -- Universite Libre de Bruxelles.
    7. Feyen, Erik & Lester, Rodney & Rocha, Roberto, 2011. "What drives the development of the insurance sector ? an empirical analysis based on a panel of developed and developing countries," Policy Research Working Paper Series 5572, The World Bank.
    8. Peter Haiss & Kjell Sümegi, 2008. "The relationship between insurance and economic growth in Europe: a theoretical and empirical analysis," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 35(4), pages 405-431, September.
    9. Fenn, Paul & Vencappa, Dev & Diacon, Stephen & Klumpes, Paul & O'Brien, Chris, 2008. "Market structure and the efficiency of European insurance companies: A stochastic frontier analysis," Journal of Banking & Finance, Elsevier, vol. 32(1), pages 86-100, January.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Business cycle; insurance; life insurance; macro-financial determinants; non-life insurance;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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